Oil price recovering after year’s worst collapse

Global crude prices are recouping some of last week’s losses as of Monday. The Organization of Petroleum Exporting Countries (OPEC) is considering suspending a planned output increase due to the spread of the new Covid-19 strain.

Brent crude oil futures had gained 4% to reach $75.63 per barrel by 07:39 GMT, after dropping below $73 on Friday. Meanwhile, US West Texas Intermediate crude was up 4.81%, at $71.43 per barrel, recovering from Friday’s low of $68.

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The Friday price plunge – the worst since April 2020 – occurred shortly after the World Health Organization warned about the latest Covid-19 variant, Omicron, forcing investors to weigh the risks of potential virus-related restrictions.

While uncertainty about the group’s potential steps in response to a reserves release by the US and several major oil-consuming states remains, speculations abound that rising Omicron cases would prompt OPEC to suspend the previously agreed production increase of 400,000 barrels per day in January.

“With the potential demand hit, we believe the group could take a pause in its current supply increases. This would be consistent with the cautious approach OPEC+ has taken since the initial outbreak of Covid-19,” ING Group said, as cited by Reuters.

OPEC and the allied oil producers led by Russia, known as OPEC+, have postponed technical meetings until later this week to assess the impact of the new variant on global demand for crude.

“OPEC delaying meetings is not good for oil prices. But outside the formal meetings, OPEC can still make statements. We’ll just have to wait and see,” Lukman Leong, analyst at Jakarta-based Deu Calion Futures told the agency.

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