[Global Issue+] Omicron Fear Silences US-OPEC+ Oil Price Dispute

US-Saudi Agreement to Halt Oil Price Dispute... Oil Prices Stabilize
Biden-Putin Virtual Summit Scheduled... Hopes for Tension Easing

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] As the dispute over international oil prices between OPEC+, a major oil-producing countries' consortium, and the United States has been settled, the previously volatile and unstable international oil prices are showing signs of stabilization. The United States is focusing on stabilizing energy prices by actively negotiating with key oil-producing countries that influence OPEC+, such as Saudi Arabia and Russia.

The oil-producing countries are also accepting the U.S. negotiation proposals amid growing concerns over reduced oil demand due to the spread of the COVID-19 Omicron variant. With a virtual summit between U.S. President Joe Biden and Russian President Vladimir Putin expected soon, it is anticipated that tensions between the two sides will ease further, leading to a more stable trend in oil prices.

U.S. Indicates Delay in Strategic Petroleum Reserve Release and Cooperation with Saudi Arabia... Omicron Fear at Play

[Image source=AP Yonhap News]

According to foreign media including the AP on the 4th (local time), the U.S. government plans to postpone the decision to release strategic petroleum reserves that had been pursued with major oil-consuming countries such as China, India, South Korea, and Japan. David Turk, U.S. Deputy Secretary of Energy, stated in an interview with major foreign media on the 1st that "If oil prices drop significantly and the pain consumers experience in the U.S. and other countries disappears for any reason, we will use policy tools differently."

Along with this, the U.S. government reportedly reached an agreement with Saudi Arabia to halt the oil price dispute, leading to OPEC+ maintaining its planned production increase. According to Bloomberg News, a U.S. delegation led by Amos Hochstein, the U.S. President’s senior energy advisor, visited Saudi Arabia at the end of last month, successfully halting the recent oil price dispute and leading cooperation on oil policy with Saudi Arabia.

In response, OPEC+ announced on the 2nd at an oil ministerial meeting that it would maintain the existing monthly production increase of 400,000 barrels. Previously, OPEC+ had warned that it might temporarily suspend the production increase policy, causing significant fluctuations in international oil prices. However, since the end of last month, with the spread of the Omicron variant and the intensification of COVID-19 outbreaks in major countries raising concerns about renewed lockdowns and reduced oil demand, oil-producing countries have actively engaged in negotiations with the U.S.

As a result, international oil prices, which had been repeatedly volatile, are now showing a stable trend. On the 3rd, West Texas Intermediate (WTI) crude oil on the New York Mercantile Exchange (NYMEX) closed at $66.26 per barrel, down 0.36% from the previous session. After a 13.06% drop on the 26th and a 5.38% surge on the 30th of last month, the previously unstable oil prices have calmed down.

Biden-Putin Virtual Summit Soon... Further Easing of Tensions Expected

[Image source=EPA Yonhap News]

Russia, another country that significantly influences OPEC+ oil price decisions, is also showing signs of improving relations with the U.S. With a virtual summit between President Biden and President Putin expected next week, there are hopes that military tensions and energy issues between the two countries will ease simultaneously.

According to Russian news agency TASS on the day, Kremlin aide Yuri Ushakov said in a press briefing, "President Biden and President Putin are scheduled to hold a virtual summit on the 7th," adding, "The two leaders will mainly discuss bilateral issues and urgent international matters such as Ukraine, Middle East issues, and the Iran nuclear deal during this virtual summit."

Accordingly, concerns about a full-scale war, which had escalated due to Russia’s large-scale troop deployment near the Ukrainian border, are expected to be largely alleviated. Although the Omicron variant is spreading rapidly, international medical reports indicate its fatality rate is low, leading to forecasts that international oil prices will show a more stable trend.