WTI now $6.0 above Thursday’s lows after OPEC+ decision interpretted as “vote of confidence” in market

• WTI is about $1.0 higher on the day in the $68.00s, about $6.0 above Thursday’s lows.
• Analysts framed OPEC+’s decision to press ahead with output hikes as a “vote of confidence in the near-term demand outlook”.

Oil prices continue to trade with an upside bias, with front-month WTI futures having now recovered roughly $6.0 (nearly 10%) to the $68.00s from Thursday’s lows in the $62.00s. On the day, that translates to gains of about $1.0 or 1.5%. Oil prices tumbled on Thursday in the immediate aftermath of OPEC+’s surprise decision to press ahead with 400K barrel per day output hike in January, going against analyst expectations for the group to halt output amid Omicron-related uncertainty.

But market participants deemed the knee-jerk reaction to be excessive. Some analysts framed OPEC+’s decision as a “vote of confidence in the near-term demand outlook” and interpreted the decision as OPEC+ signaling that it does not expect Omicron to have a lasting impact on demand. Other analysts pointed out that the cartel did caveat that it was prepared to meet again ahead of its next scheduled 4 January meeting if there was a marked change in market conditions. In other words, a halt to/reversal of output hikes remains on the table if needed.

With OPEC+ in the rear-view mirror, oil traders will on Friday be focused on US macro data in the form of the November labour market report and, more importantly, any new information/headlines about Omicron. A strong labour market report should confirm that the Fed will accelerate the pace of their QE taper in January, which should have a very limited impact on oil prices.