The chairman of Vitol Asia indicated on Nov. 28 that an OPEC+ committee meeting on Dec. 2 is expected to take a cautious stance in light of the new South African COVID-19 variation, which adds to their concerns about demand growth and a possible oil surplus as reported by S&P.
The Joint Ministerial Monitoring Committee, which will meet virtually ahead of the OPEC+ meeting also set for Dec. 2, will have very preliminary information about the new variant Omicron, Mike Muller told a Gulf Intelligence webinar.
“I’m not sure they are going to react with an about-turn quite as quickly as this unless more information [about the new variant] comes to light,” Muller said.
“Will they err on the side of caution also?”
I think they might and that seems to be the consensus out there.
“They seem a lot more concerned about demand concerns, about economic shocks, about question marks about economic growth in China and about stats from India.”
US-led SPR releases
Fears of fresh lockdowns as a result of the new variation sparked the oil price drop.
After details of a new viral variety surfaced, S&P Global Platts rated Dated Brent at $73.27/b, the lowest in two months.
OPEC has been criticised by US President Joe Biden for the high oil and gas prices that have hurt drivers in the world’s largest crude consumer.
“This week, we initiated a massive effort to control the price of oil – an effort that will spread across the globe and eventually reach your corner gas station,” Biden declared on Twitter on Nov. 27. ” It will take some time, but the price of gas where you fill up your tank should drop soon.”
“I believe that in a world without Omicron, we would be facing an ever-tightening supply picture, and the globe would require OPEC to pump extra volume into the market,” he said. “If they don’t, and this turns out to be a false alarm, a fake scare….and this virus turns out not to be a threat to energy consumption, then the market will want continuous supply.”
He went on to say that oil market stocks are still low and that OPEC+ spare capacity is concentrated in the hands of a few key members.
“Global inventories are below pre-pandemic levels, and investment in the global upstream, particularly shale, the fastest-responding sector, hasn’t been as high as it could have risen to allow a response if global demand were to revive early next year,” Muller said.
He noted that a colder-than-expected winter and the shift from gas to oil in power generation could influence OPEC+ decision-making.
“Of course, the oil flipping into what was gas demand is in place,” he said, adding that it might even accelerate.
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