OPEC and its allies headed into a second day of talks on whether to pause their production increases as the resurgent pandemic throws the outlook for next year into disarray.
With crude already in a bear market as the omicron variant of COVID-19 imperils demand, traders were widely expecting the alliance led by Saudi Arabia and Russia to defer a modest supply hike scheduled for January. On Wednesday, the coalition’s technical experts forecast that markets face a surplus in the first quarter that, although smaller than initially thought, remains substantial.
"Markets are now pricing the worst for global oil demand as there is extreme uncertainty about the omicron variant,” Al Salazar, vice president of intelligence at Enverus Intelligence Research, said in a note. "Travel restrictions combined with knock-on economic effects are now shifting the risk on oil prices decidedly to the bearish side.”