Brent Oil Slides on Covid Concerns Ahead of Key OPEC+ Meeting
(Bloomberg) — Brent oil slumped as increasing coronavirus cases and a new Covid-19 strain raised concerns about the outlook for energy demand ahead of next week’s OPEC+ meeting on production policy.
Futures in London slid toward $81 a barrel as crude was swept up in a wave of caution across global markets. Virus cases are climbing in Europe and the U.S., while U.K. authorities will temporarily ban flights from some southern African countries and put travelers in quarantine over worries about the new strain.
“The new Covid variant found in South Africa is ringing fresh alarm bells,” said Vandana Hari, founder of Vanda (NASDAQ:VNDA) Insights in Singapore. “I expect OPEC+ to stay the course on its tapering strategy but if the new variant emerges as a major problem in the coming days, it may end up pausing the monthly increments.”
OPEC+ meets Dec. 2 to decide production policy for January following the unprecedented move by the U.S. and other nations to tap strategic stockpiles to tame rising energy prices. While delegates from the cartel have signaled that supply might have to be held back, Citigroup Inc (NYSE:C). said reducing quotas would erode the group’s claim of providing public good by stabilizing markets.
The alliance, which has been restoring 400,000 barrels a day of supply to the market each month, will have to consider internal projections that the reserves release will exacerbate a surplus it’s forecasting for early next year. The group has, however, been accused of creating “artificial tightness” by the International Energy Agency, which urged an accelerated return of supply.
OPEC’s ability to meet its expanding output targets has been hindered by under-performance by some members. The group delivered barely half the increase it had planned for October as African nations — particularly Angola and Nigeria — struggled with production losses.
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