OPEC+ TO HIKE OUTPUT IN JANUARY AMID PANDEMIC DOUBTS

LONDON—Major oil producers decided Thursday to keep raising output levels in January, despite the Omicron coronavirus variant raising fresh questions over demand.

The Opec+ alliance led by Saudi Arabia and Russia had so far resisted US-led pressure to significantly boost output to rein in surging energy prices.

Observers had expected the club to opt for a freeze in production for January, particularly after the emergence of the Omicron variant sent countries rushing to impose new travel curbs and mull other measures that could dampen demand and hurt oil prices.

But after meeting for a little over an hour on Thursday afternoon via video conference, the 13 members of the Vienna-based Organization of Petroleum Exporting Countries (Opec) and their 10 allies decided to stick with a modest increase in output of 400,000 barrels per day every month, as they have been doing since May.

The Opec+ meeting came a week after the United States and to a lesser extent China, India and Japan decided to dip into their strategic reserves to help bring down crude prices, after a price surge that has undermined economic recovery.

Surprising

“We suspect that the US-led coordinated release of oil reserves ... was one reason why Opec+ decided to push ahead with their plan to raise oil output,” said commodities economist Edward Gardner from Capital Economics.

“Rather surprisingly, Opec+ decided to go ahead with the increase, sending prices back into the red,” said Michael Hewson, chief market analyst at CMC Markets.

The decision did indeed send prices for the two benchmark oil contracts, WTI and Brent, tumbling to their lowest levels since late August at $62 and $65 per barrel respectively.

They then recovered to nearly $67 and $70, both gains on the day, but were still some way below the highs recorded in late October.