The Organization of the Petroleum Exporting Countries and its allies, also known as OPEC+, has announced that it will be maintaining its established policy of increasing oil output by 400,000 barrels per day in the month of January. Fearing a drop in demand due to the Omicron variant, the group was reportedly considering a number of different responses, including halting or reducing the Jan. daily increases.
The Omicron concerns were outweighed by worry over the potential backlash from Washington if output was slowed. The Biden Administration has been working on a multi-national project to increase monthly oil output in an effort to reduce gas prices. OPEC+ has rebuffed officials' calls for the group to accelerate its oil output increases.
However, the pressure from the U.S. was still enough to stall the group from acting to preempt the oversupply issues it foresees due to the resurging pandemic.
"Politics triumphs over economics. Consumer countries mounted enough pressure," OPEC observer Gary Ross said. "But weaker prices now will only mean stronger later."
The group's current stance on daily increases may not reflect its Omicron concerns, but OPEC+ officials are open about the potential impact the virus could have on demand.
"We have to closely monitor the market to see the real effect of Omicron," one OPEC+ delegate told reporters following the talks.
The next meeting between OPEC+ delegates is scheduled to take place on Jan. 4. However, an earlier meeting may be scheduled to adjust the group's actions if the market starts to dip. According to an OPEC+ statement, the group is ready to "make immediate adjustments" as needed.
U.S. officials have also stated that the Administration's commitment to release 50 million barrels from strategic reserves may be adjusted if global oil prices see significant drops, though there are reportedly no current plans to do so.
U.S. Deputy Energy Secretary David Turk told Reuters that each of the governments involved in the price reduction efforts could change the timing of their reserve releases if necessary.
"I think each country will make decisions based on what's useful and good for their consumers and based on where the price is," Turk said.
"The metric of success for any policy from our end related to these issues is 'what is the price at the pump'? ... not whether we get 50 million barrels out as quickly as we possibly can," Turk added.
According to Turk, the White House is also considering banning crude oil exports from the U.S. in order to keep gas prices in the country in check, but a final decision has yet to be made by the President.
Oil prices dipped following the emergence of the Omicron variant, but the OPEC+ announcement caused the price to rebound.
