Crude oil price in oversold territory ahead of the OPEC+ meeting

Crude oil price remains on a downtrend ahead of the OPEC+ meeting. WTI futures are trading at $68.06; down by about 20% over the past month. At the same time, the benchmark for global oil – Brent futures – is in the oversold territory at its current level of $71.10.

COVID-19 variant

Crude oil price has erased Monday’s gains as the market continues to weigh on the risks linked to the latest COVID-19 variant – Omicron. On the one hand, investors are concerned that the variant will lower demand during this year’s holiday season. However, some analysts have indicated that the market is overreacting.

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Amrita Sen, the Director of Research at Energy Aspects holds the latter opinion. During a recent interview with Bloomberg Markets, the analyst indicated that “the market is pricing in the worst possible scenario”. Subsequently, she noted that a confirmation that the vaccines are effective against the new variant will likely boost crude oil price back above $80 per barrel.

OPEC+ meeting

With the ongoing market volatility in mind, investors are eyeing the OPEC+ meeting scheduled for Thursday. Its technical meetings have been moved to later in the week as the alliance seeks to gather more information about the latest COVID-19 variant and its impact on crude oil price and demand.

Besides, investors will be keen on how the alliance reacts to the expected SPR releases. On Monday, the US confirmed that it will go on with its plan to release crude oil from its strategic petroleum reserves despite the recorded decline in prices.

Amid the heightened concerns over oil demand and oversupply, OPEC+ may decide to halt its current output plan. At the peak of the coronavirus pandemic in 2020, the group withheld the commodity as a means of balancing prices. Subsequently, it has been increasing output gradually by 400,000 bpd per month. Thursday’s meeting will be a crucial determinant on whether it will maintain the set pace.

Besides, investors will closely watch the Iran nuclear talks that began on Monday. Enrique Mora, the EU official chairing the talks stated that he is “extremely positive”. Lifting the sanctions imposed on Iran by the US would result in a significant increase in the country’s oil supply. Currently, it is releasing 2.5 million bpd. Prior to the sanctions, its output was at 3.8 million bpd.