A few days ago, the talk in the oil markets was only about the trend of major consumers led by the United States, which announced last week the release of part of its Strategic Petroleum Reserve in a move aimed at reducing prices, which rose as a result of the recovery of the global economy affected by the Covid-19 pandemic.
That talk did not last long, after the new coronavirus variant Omicron surprised the oil markets, causing prices to fall to their lowest level in five months after the new closures due to the new variant.
There are currently real fears of an oversupply in the oil market during the next few months if the threat of virus continues. Major consumers, especially the United States and China, insisted on withdrawing from the strategic reserves to face the high prices, as these countries decided in advance.
HE the Former Deputy Prime Minister and Minister of Energy and Industry as well as Chairman of the Abdullah bin Hamad Al-Attiyah International Foundation for Energy and Sustainable Development, Abdullah bin Hamad al-Attiyah says that the oil markets which were waiting for the United States and some countries such as China, Japan and India to use their strategic reserves of oil in order to reduce prices, were surprised by the new variant of the coronavirus, which accelerated the decline in prices.
In an interview with Qatar News Agency (QNA), al-Attiyah said that the new variant may postpone the step that the United States would have taken, because prices have already fallen, adding that the rapid changes in the oil market are now subject to the extent of the virus' spread and the reactions of the major industrialised countries in particular.
Al-Attiyah expects that oil prices will witness a further decline due to the increasing global fears of the new variant, adding that if the complete closures return again, oil prices will drop dramatically.
The countries of the world, in such situations, go into a quick reaction, and if fears increase about the new mutation, there will be complete closures in many countries, which will lead to a further drop in oil prices.
Indicators from the oil markets seem to support these expectations, since the new infected cases of the new variant were announced in a number of countries, the price of Brent crude fell in the Asian markets, to its lowest level on Monday, reaching $74.35 per barrel.
Al-Attiyah explained that the countries participating with the United States in the decision to use their stocks oil reserve see that the motive is related to the decline in the supply of oil in the markets and not because of the price of gasoline. Moreover, it is unlikely that the current co-ordination between the United States and the rest of the countries will result in a long-term alliance.
He pointed out that this is the first time the United States has co-ordinated such a step with major oil consumers in the world, in response to the Opec+ alliance's refusal to increase supplies to calm the prices. The alliance has adhered to the plan to increase production at a gradual pace previously approved by continuing to increase daily crude production by 400,000 barrels per day.
Al-Attiyah added that in the current situation, Opec+ may stick to its current policy and maintain its pre-agreed schedule to increase production by 400,000 barrels per day each month. It has changed its policy to ensure market stability and avoid price collapse due to oversupply, explaining that prices often tend to fluctuate more during a period of political tension between consumers and producers, leaving the field open to all possibilities.
This was also confirmed by the Deputy Prime Minister of Russia Alexander Novak, who said that his country does not see the need to take urgent measures regarding the oil market due to the new variant of the virus, easing the chances that the Opec+ group will change production policies this week, according to what was quoted by some news agencies.
Opec and its allies held online meetings this week to determine production policy, and the markets are currently awaiting the next step from the Opec+ alliance in light of new developments.
Amid these concerns, oil prices saw a slight rebound on Monday as investors searched for deals in the wake of the market slump on Friday amid expectations that Opec+ may halt production increases due to the spread of the new variant.
The only certainty now is that the new variant has cast a shadow on global markets, which requires global co-operation to confront the challenge, maintain the continuity of global economic recovery, and overcome the raging wars between consumers and producers.