Oil bulls needed a lifeline. Instead, they were dealt another blow after OPEC+ agreed to stick to their previously agreed plan of hiking output by 400,000 barrels per day in January.

Brent crude tumbled to levels not seen since late August below $65.70 while WTI crude slipped as low as $62.30 before rebounding. The cartel’s decision to proceed with their next output hike comes at a time where the Omicron variant has cast a veil of uncertainty over the global economic recovery. On top of this, fears continue to linger over the United States releasing more crude reserves in an attempt to bring down soaring energy and petrol prices.

While the path of least resistance for oil certainly points south, there could still be some light at the end of the dark tunnel. One thing to keep in mind is that OPEC+ signalled that they could revisit the decision to hike output at any moment should the current market conditions shift. With the meeting not officially closed, anything could be on the cards with a decision to pause or cut output a possibility if conditions warrant.

Digging deeper, a decision to ditch the planned supply increase in January would have carried some political risk. Earlier this month, OPEC+ rejected calls from the United States to increase output faster in a bid to tame rising oil prices. Suspending the previously agreed production increase could have strained relations between both sides. Nevertheless, today’s decision is likely to set the tone for oil for the rest of 2021.

Interestingly, oil prices later rebounded on Thursday, giving up earlier losses as markets evaluated whether the Omicron variant may not be as troublesome as initially feared. Brent crude is pressing against the $70.00 resistance level as of writing as bulls try to snatch back the steering wheel. While a daily close above this resistance could open the doors to further upside, the first major barrier will be around the 200-day Simple Moving Average just above $71.60. A failure to clear this point could result in a decline back towards $68.20, $65.66, and $65.00.

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