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.¡±
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