Head of IEA criticizes OPEC for failing to lower oil prices even as fears of new virus variant loom

Nov 26, 2021: The head of the International Energy Agency, Fatih Birol, has lashed out at OPEC for failing to bring oil prices down.

According to a quote from CNBC, ″A factor I would like to underline that caused these high prices is the position some of the major oil and gas suppliers, and some of the countries did not take, in our view, a helpful position in this context,”

Earlier this week, U.S. President Joe Biden announced that the Department of Energy would release 50 million barrels of oil from the Strategic Petroleum Reserve (SPR) in a bid to lower high gasoline prices in a coordinated effort with other major oil-consuming nations.

The coordinated release was meant to cool oil prices, but instead, prices rallied even after the U.S. said it would release crude from strategic reserves.

The IEA acknowledged the release of oil but made a point of noting that the agency had nothing to do with it, with Birol saying the IEA only resorts to reserve releases in emergencies. The official noted the move by the U.S. and its allies was related to the fact that surging oil prices had placed an additional burden on consumers at a time when inflation was also on the rise, and higher oil prices were only aggravating the situation.

So far, OPEC+ has not indicated that either inflation or anything else would interfere with its plans to stick to additions of 400,000 bpd to combined production every month until total output returns to pre-pandemic levels. Instead, there have been hints that the cartel might pause the additions in response to the reserve release.

Global oil prices have plunged by over 10% in the biggest one-day drop since April last year after a new variant of Covid-19 raised fears in the market of renewed global travel restrictions that could derail the oil market’s recovery.

The “the most worrying” new Covid-19 variant caused the price of Brent crude to tumble by $8.77, or 10.7%, to $73.45 a barrel on Friday afternoon after countries across Europe and Asia brought in immediate travel restrictions to guard against the spread of the B1.1.529 variant identified in several African countries.

The US oil price per barrel plunged by more than $9.12, or 11.6%, to $69.27 in one of the steepest declines since the shutdown of global economies and severe travel restrictions in April 2020 caused oil prices to turn negative for the first time across the US.

After its identification earlier this week, the UK government announced on Thursday night it was putting six southern African countries back on England’s travel red list, with British travellers returning from those locations from 4am on Sunday having to quarantine. Meanwhile, the European Commission president, Ursula von der Leyen, said the EU also aimed to halt air travel from the region.

B.1.1.529 threatens to reverse the oil market’s gains in recent months as travel and economic activity had begun to recover from a series of coronavirus lockdowns around the world. The new variant has multiple mutations to its spike protein that it is feared could enable it to evade the immune response induced by existing vaccines.

The emergence of a new variant is also likely to effect negotiations scheduled for 2 December between the Opec oil cartel and its allies, where the plan was to discuss whether to adjust the proposal to increase output by 400,000 barrels a day in January and beyond.

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