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Oil ends higher after a day of wild swings on OPEC, Omicron

CommoditiesDec 02, 2021 04:00PM ET
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© Reuters. FILE PHOTO: General view shows Mexican state oil firm Pemex's Cadereyta refinery, in Cadereyta, on the outskirts of Monterrey, Mexico April 20, 2020. REUTERS/Daniel Becerril/File Photo

By Arathy Somasekhar

(Reuters) -Oil prices settled more than 1% higher on Thursday, after a see-saw session that saw benchmarks swing in a $5 range after OPEC+ surprised markets by sticking to its plans to boost output slowly.

Brent crude futures settled up 80 cents, or 1.2%, at $69.67 a barrel after touching a low of $65.72 on the day, while U.S. West Texas Intermediate (WTI) crude futures rose 93 cents, or 1.4%, to $66.50, after dipping as low as $62.43.

The market sold off dramatically after the Organization of the Petroleum Exporting Countries and its allies known as OPEC+ issued a bit of a surprise by sticking to plans to boost output monthly by 400,000 barrels per day.

It was the latest in a series of events that have caused crude to slump wildly, having lost 24% in the last three weeks.

Oil futures rebuilt the rally by the end of the day, but the combination of uncertainty around the Omicron variant, efforts by governments to stem the tide of new infections and expectations for more supply kept traders on their toes.

"The markets have just been trying to digest so much news," said Rebecca Babin, senior energy trader at CIBC Private Wealth US. "It's like a python eating a pony."

Commodity trading advisors as well as institutions and hedge funds have been selling as well, closing out positions after an overall strong year for crude futures.

OPEC+ decided on Thursday to boost supply in January in line with previous months. Since August, it has been gradually winding down record cuts agreed to in 2020.

"I think the OPEC decision is sending a signal of confidence that they believe the price action recently has been overdone," said Phil Flynn, senior analyst at Price Futures Group.

The White House said it welcomed the decision, but added that the United States had no plans to reconsider its decision to release crude reserves.

OPEC+ has been adding 400,000 bpd to its target, but falling well short of that on a monthly basis due to underinvestment in several members' oil industries.

The additional supply comes as markets grapple with the lack of clarity on the severity of the Omicron variant of the coronavirus and whether vaccines will remain effective against it.

U.S. President Joe Biden said his administration's plan to fight COVID-19 does not include shutdowns but added that experts believed coronavirus cases will continue to rise in the winter.

U.S. Treasury Secretary Janet Yellen warned that the variant could slow global economic growth.

Meanwhile, the European Union's public health agency also said the variant could be responsible for more than half of all COVID-19 infections in Europe within a few months.

Still, JP Morgan Global Equity Research remained bullish on oil prices and said they were expected to overshoot $125 a barrel next year and $150 in 2023 due to capacity-led shortfalls in OPEC+ production.

Oil ends higher after a day of wild swings on OPEC, Omicron
 

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Comments (7)
Todd Gray
Todd Gray Dec 02, 2021 2:04PM ET
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Supply increases, but prices pop? Smell the coffee! We're at the tail end of the holocene extinction cycle - carbon levels always increase toward the end of an extinction cycle. 20,000 years ago the Northern ice cap extended down into the central United States & Southern Siberia. Manhattan was 1 full mile under ice. And, almost all of that melted off before John Smith set sail from England. The ice cap in the Antarctic is snapping off because there's trillions of tons of new ice on it, creating a huge natural displacement imbalance - a totally natural phenomenon. Pull you head out of where the media's led it! Your like ticks that can only see the walls & bottom of the little hole you bored into. Pull your head out & see the greater reality. The climate changes are natural, unstoppable, and the earth doesn't need any saving.
Andrew Ulferts
Andrew Ulferts Dec 02, 2021 2:04PM ET
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Thx Todd Gray. Keep it up!
Midnight Trader
Midnight Trader Dec 02, 2021 2:04PM ET
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Wow! Get your facts right!
cedrik marchand
cedrik marchand Dec 02, 2021 1:54PM ET
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rise?
Alan Rice
Alan Rice Dec 02, 2021 12:28PM ET
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Some organizations are just NOT going to get " climate change" ( Human-engineered planetary destruction). But the question still remains, nonetheless : Will We ??
Ndrew Wen
Ndrew Wen Dec 02, 2021 8:58AM ET
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Where is the rise?
Jamie An
Jamie An Dec 02, 2021 6:50AM ET
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Opec should stop 400k additional oil production immediately. Oil price is core price so market do not want rollercoaster anymore. No strategic oil release effect, no artificial price goes up or down.
stetnius munsin
stetnius munsin Dec 02, 2021 6:19AM ET
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If Opec+ agree to supply/release oil.. perhaps the oil be downside .. otherwise, it will be rise up.. US high demand on oil thats why they push OPEC release their oil
emad hijazi
emad hijazi Dec 01, 2021 11:31PM ET
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oil rises ?!
Libran Ji
Libran Ji Dec 01, 2021 11:31PM ET
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exactly what I was thinking
 
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