By Peter Nurse
Investing.com — Oil prices weakened Thursday following a report that OPEC and its allies have decided to release more oil into the market as previously agreed, despite the uncertainty caused by the new Covid variant.
By 9:25 AM ET (1425 GMT), U.S. crude futures traded 2.3% lower at $64.06 a barrel, while the Brent contract fell 2.2% to $67.37.
U.S. Gasoline RBOB Futures were down 1.4% at $1.9241 a gallon.
The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, has agreed to go ahead with its planned January oil output rise of 400,000 barrels per day, Reuters reported Thursday, citing two sources.
Uncertainty had gripped the market over whether the group of top producers would follow through with the existing pact to raise output given the uncertain situation regarding the pandemic and reluctance to oversupply the market.
“The short-term outlook is clouded with uncertainty and until there is some clarity on the impact of omicron it is difficult to have a strong view on price direction in the near term,” said analysts at ING, in a note. “As long as there is this uncertainty, the market will likely be pricing in some fairly large downside risk to demand.”
On top of the Omicron-related uncertainty, with a large number of countries increasing travel restrictions to try and curb the spread of the virus, OPEC+ also has to judge the effect on global supply from the White House-led coordinated reserves release.
On balance, the market had expected the group to pause further supply increases, especially after Angolan Minister of Mineral Resources and Petroleum Diamantino Azevedo said on Wednesday that “in these uncertain times it is imperative” that OPEC+ “remain prudent in our approach, and prepare to be proactive as market conditions warrant.”
Additionally, two sets of data released this week showed that U.S. inventories fell by less than expected last week, suggesting a weakening of final demand due to high prices and other factors.