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Latest coronavirus variant has put oil producing countries in a tough spot

A MARTINEZ, HOST:

The oil cartel known as OPEC+ meets this week amid the news around the new COVID variant, omicron. Oil ministers will be trying to decide how to respond, as NPR's Camila Domonoske reports.

CAMILA DOMONOSKE, BYLINE: The announcement of the new coronavirus variant sent oil prices diving late last week, falling even faster than stocks.

(SOUNDBITE OF MONTAGE)

ABIGAIL DOOLITTLE: Take a look at oil - the worst day in quite some time.

UNIDENTIFIED REPORTER #1: I mean, you see a 10 or 11% drop in a day.

UNIDENTIFIED REPORTER #2: Brutal.

DOMONOSKE: It was an abrupt turnaround. The focus had been on high oil prices, as driving and travel and the economy in general recovered from the pandemic. Now the word on everyone's lips is less recovery, more uncertainty. OPEC+, the powerful group of oil producers, delayed some of this week's meetings by a few days to try to get a handle on what's happening. But getting real data will take more than a few days. Helima Croft is with RBC Capital.

HELIMA CROFT: We're probably not going to know for a couple weeks about the efficacy of the vaccine. And so they are operating in an information vacuum to a certain extent.

DOMONOSKE: That information vacuum might feel familiar. Many of us are stuck in it as we try to decide, should we change our holiday plans, avoid indoor restaurants again? And oil-producing countries have a choice to make, too. They have to guess whether this variant will shut down the world again and slash demand for gasoline and jet fuel.

CROFT: They have to decide. Do they take a pause on increasing production? Or do they proceed as planned with their 400,000-barrel-a-day monthly increase?

DOMONOSKE: Quick recap - when the pandemic started, oil demand around the world fell overnight. And prices collapsed, too. So these countries cut their production by a lot. As people started working and shopping and traveling again, oil producers have been boosting their output bit by bit. But oil demand was growing even faster, so oil prices shot back up. In fact, prices got so high that the United States and some other countries made a dramatic announcement about tapping their strategic petroleum reserves. Ellen R. Wald runs a consulting firm.

ELLEN R WALD: This is something that the United States and lots of other countries have. It's basically - they're these underground caverns that store oil.

DOMONOSKE: So just last week, these world leaders announced that they would release a bunch of that oil to try to push prices down.

WALD: Markets didn't react all that much. The price of oil actually went up after this news came out.

DOMONOSKE: But then, just days later, omicron. And prices took a plunge. Now OPEC+ has to figure out what to make of all this. This kind of whiplash is exactly why the group is meeting so often. Pre-pandemic, OPEC only met twice a year. But now, planning six months out seems impossible. So they've been meeting every single month. Amrita Sen is the director of research at Energy Aspects.

AMRITA SEN: They've said, we are going to be constantly monitoring the market so that we can react quickly.

DOMONOSKE: Because in a pandemic marked by uncertainty, a lot can change in a few days.

Camila Domonoske, NPR News.

(SOUNDBITE OF PHAELEH'S "RED LIGHT GREEN LIGHT") Transcript provided by NPR, Copyright NPR.

Camila Flamiano Domonoske covers cars, energy and the future of mobility for NPR's Business Desk.