Oil prices volatile as Omicron and OPEC+ drive trading

Oil prices swung sharply on Thursday as OPEC+ decided to go forward with a scheduled production hike despite the threat Omicron may stifle energy demand.

Equities trading was also driven by the pandemic as traders reacted to the latest developments regarding the Omicron variant and efforts by countries to handle the upswing in cases of the Delta strain.

Oil prices had been rising strongly ahead of the meeting of OPEC and its allies amid expectations they would pause their modest monthly crude production increases given the added uncertainty Omicron brings to global demand.

However, prices dropped by two percent as the oil producers decided to go ahead with a planned increase of 400,000 barrels per day in January.

"Demand concerns were already on the rise and the last thing crude oil bulls were expecting to hear was another rollover of the current policy from the OPEC+ group," said analyst Fawad Razaqzada at Think Markets.

"Yet contrary to some expectations for only a moderate hike or no hike at all for January, that's exactly what happened," he said.

Oil prices later recovered their losses and stood higher as European equity markets closed for trading.

Razaqzada said the production hike will completely remove the threat of supply shortages at a time when demand is expected to fall.