OPEC and its Russia-led allies decided to stick to a previously agreed hike in oil output, in absence of more data on the impact of the new omicron variant.
The 23 OPEC+ countries, which control roughly half of global oil supply, have agreed to increase production by 400,000 barrels per day in January 2022.
Oil prices initially plunged on the news, then recovered to positive territory. Brent crude closed the session at US$70.5 a barrel after sliding to US$65.9 just after midnight.
The January output hike appears counterintuitive to the significant oversupply that OPEC+ expects to see in early 2022. But continued pressure from the US for more crude and desire by some OPEC+ members to regain market share lost to the pandemic outweighed options for a smaller output hike.
The US has heavily lobbied OPEC+ to pump more oil to keep surging energy prices at bay. Last month, the Biden administration confirmed its plan to release 50 million barrels of oil from its strategic reserve and threatened further releases.
White House Press Secretary Jen Psaki told reporters “we welcome the decision today to continue the 400,000 b/d increase. Together with our recent coordinated release from the SPR, we believe this should help facilitate the global economic recovery.”
OANDA senior market analyst Ed Moya said that OPEC+ appears optimistic about what omicron might mean for oil markets and “that should be viewed as partially bullish.”
"The bottom appears to be in place for crude prices and that should remain the case unless several US states go into lockdown mode,” he added.
ASX energy stocks opened moderately higher with Woodside Petroleum (WPL) up 1.1%, Santos (STO) trading 0.8% higher and Oil Search (OSH) gaining 1.5%.
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