09:07 AM EST, 12/01/2021 (MT Newswires) -- Oil prices rebounded from three-month lows early on Wednesda as the OPEC+ group begins two days of meetings to decide on supply plans for 2022 amid concerns the Covid-19 Omicron variant will reignite a waning pandemic.
West Texas Intermediate crude oil for January delivery was last seen up US$2.04 to US$68.22 per barrel after touching US$69.49 earlier. February Brent crude, the global benchmark, was up US$2.19 to US$71.42.
The market is attempting a rally after falling to the lowest since late August on fears the spread of the new Covid-19 variant will prompt renewed lockdowns, cutting demand, though many analysts consider the fears to be overblown.
"We estimate based on our pricing model, that the market has now priced in a mammoth c.7 mb/d negative demand hit over the next three months, with no offsetting OPEC+ response," Goldman Sachs said in a note. "To put this into context, this would represent any of these extreme outcomes: (1) not a single plane flying around the world for three months, or (2) half as
intense as the 2Q20 global lockdown, or (3) a world even worse-off than before vaccinations."
OPEC+ is beginning two days of meetings to decide on its supply plans for next year with the group already forecasting supply will exceed demand in the first quarter of 2022 even without any new Covid-19 restrictions. The group will decide whether to continue returning supplies cut at the start of the pandemic in 0.4-million barrels per day monthly increments amid OPEC expectation that supply could two-million bpd higher than demand in January and rising in February and March.
"The arrival of the Omicron variant and the ensuing sell off obviously increases the odds that OPEC+ will opt to hit the pause button on the planned 400 kb/d monthly production increase when they meet on Thursday. In fact, this seems precisely the scenario that the pause option was designed for when the producer group announced their phased increase plan in July," RBC Capital Markets said in a report.