Oil prices climbed on Tuesday, continuing the rebound momentum of last week’s plunge, as the market expects that major oil-producing countries will suspend their plans to increase crude oil supply in January, and there is uncertainty about the severity of the Omicron coronavirus mutation.
U.S. West Texas Intermediate (WTI) crude futures jumped 99 cents, or 1.4%, to $70.94 a barrel at 0105 GMT, adding to a 2.6% rise on Monday.
Brent crude futures climbed 82 cents, or 1.1%, to $74.26 a barrel, after gaining 1% on Monday.
Fearing that the severely mutated Omicron would trigger a new lockdown and weaken global growth, oil prices plummeted by about 12% on Friday, along with other markets.
The World Health Organization said on Monday that the risk of a surge in infection caused by Omicron is very high, and several countries have tightened travel restrictions. It is not yet clear how severe the new variant is and whether it can resist existing vaccines.
Due to the overcast demand outlook, it is increasingly expected that the Organization of Petroleum Exporting Countries, Russia and its allies (collectively referred to as OPEC+), which will meet on December 2, will shelve plans to increase supply by 400,000 barrels per day (bpd) in January quantity.
“We think the group will lean towards pausing output hikes in light of the Omicron variant and the oil stockpile release by major oil consumers,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.
The pressure was already growing within OPEC+ to reconsider its supply plan after last week’s release of emergency crude reserves by the United States and other major oil-consuming nations to address soaring prices.
“Following the global strategic reserve releases and the announcement of dozens of countries restricting travel to and from South Africa and neighbouring nations, OPEC and its allies can easily justify an output halt or even a slight cut in production,” OANDA analyst Edward Moya said in a note.
On Monday, after negotiations between world powers and Iran to restart the nuclear agreement resumed, diplomats made optimistic comments, which also put pressure on the market.