In the weeks leading up to the OPEC+ meeting on production policy next week, Brent oil plummeted due to increased COVID-19 cases and a new strain.
Crude prices were swept up by a wave of caution in global markets as London futures dropped toward $80 a barrel.
In Europe and the U.S., the number of virus cases is soaring, while U.K. authorities are temporarily banning flights from some southern African countries and placing travelers in quarantine over concerns about the new strain.
While market analysts expect OPEC+ to continue its tapering strategy, if the new variant proves problematic in the coming days, it may decide to pause the monthly increments.
A coordinated special petroleum reserve also fueled a near 3% decline in the oil price on Friday.
According to reports, President Biden’s administration announced that 50 million barrels of oil would be released through partnerships with Britain, Japan, South Korea, India, and China; a total of 70-80 million barrels.
As a result of the unprecedented move by the U.S. and other nations to tap strategic stockpiles in order to tame rising energy prices, OPEC+ meets Dec. 2 to decide production policy for January.
While delegates from the cartel have indicated that supply might need to be held back, some analysts believe reducing quotas will undermine the group’s claim of stabilizing markets for the greater good.
It must also consider internal projections that the reserves release will exacerbate a surplus it expects to reach early next year. The alliance has been restoring 400,000 barrels a day to the market each month.
Nevertheless, the International Energy Agency has accused them of creating “artificial tightness” and urged a return to supplies as soon as possible.
The underperformance of some OPEC members has hindered the group’s ability to meet its expanding output targets. Angola and Nigeria, two African nations struggling with production losses, failed to deliver half the increase the group had planned for October.