By Barani Krishnan
Investing.com – Oil prices rebounded Thursday from two days of heavy selling, after a lack of compelling news on Covid’s Omicron variant, and as producer alliance OPEC+ stuck to the number of barrels it planned to roll out in January.
For days on end, there had been speculation that the 23-nation OPEC+ — comprising the 13-member Saudi-led Organization of the Petroleum Exporting Countries and 10 other oil producers steered by Russia — would cancel the additional 400,000 daily barrels it had targeted each month since July.
The alliance decided in the end to retain the status quo on its production and crude traders, probably weary from hammering the market down by almost 20% over the past week, decided to reward OPEC+ by sending crude prices higher.
The other reason for the rebound: A lack of market-moving news on the Omicron variant, which also allowed stocks on Wall Street to creep higher.
Markets were rocked on Wednesday by news of the first US case of Omicron reported in a California resident who had returned from South Africa. But on Thursday, there were few updates on the variant other than a Singapore-based infectious diseases doctor, Leong Hoe Nam, saying that the Omicron is likely to ‘dominate and overwhelm’ the world in 3-6 months.
Treasury Secretary Janet Yellen also said the variant could slow U.S. economic recovery from the pandemic.
“The decision to stick to planned increases was sensible” on the part of OPEC+, said Craig Erlam, analyst at online trading platform OANDA. He said the alliance realized the need to maintain production consistency as it awaited more data on the Omicron.
OPEC+ was also hedging for higher oil demand for heating during the coming cold months of January to March, Erlam said. “They had already planned for surges this winter, which also allows them to be patient.”
WTI, or the West Texas Intermediate benchmark for U.S. crude, settled up 93 cents, or 1.4%, at 66.50 a barrel. Prior to Thursday, WTI has lost almost 17% since its last positive close of $78.50 on Nov. 23. It had also fallen more than 23% from its seven-year high of $85.41 in mid-October.
London-traded Brent crude, the global benchmark for oil, settled up 80 cents, or 1.2%, at $69.67. Prior to Thursday, Brent lost 16% since its last positive close of $82.31 on Nov. 23. It was also down 21% from its seven-year high of $86.70 attained in mid-October.