Oil steadies, paring gains as rising COVID cases spur demand worries

© Reuters. FILE PHOTO: General view shows Mexican state oil firm Pemex's Cadereyta refinery, in Cadereyta, on the outskirts of Monterrey, Mexico April 20, 2020. REUTERS/Daniel Becerril/File Photo

By Scott DiSavino

NEW YORK (Reuters) -Crude prices edged higher on Friday after producer group OPEC+ said it could review its policy to hike output at short notice if a rising number of pandemic lockdowns chokes off demand.

Brent futures rose 90 cents, or 1.3%, to $70.57 a barrel by 12:39 p.m. EST (1739 GMT), while U.S. West Texas Intermediate (WTI) crude rose 55 cents, or 0.8%, to $67.05.

Big losses earlier in the week, however, have put both benchmarks on track to decline for a sixth week in a row for the first time since November 2018.

The Organization of the Petroleum Exporting Countries, Russia and allies, a grouping known as OPEC+, surprised the market on Thursday when it stuck to its plans to add 400,000 barrels per day (bpd) supply in January.

"Its decision to continue increasing monthly crude production is a vote of confidence in the near-term demand outlook. Better said, OPEC+ is banking on the new Omicron variant not having a lasting impact on oil demand," PVM said in a note.

But OPEC+ left the door open to changing policy swiftly if demand suffered from measures to contain the spread of the Omicron coronavirus variant. They said they could meet again before their next scheduled meeting on Jan. 4.

"Brent has climbed to $71 per barrel, which puts it around $5 above yesterday's daily low. So what is the explanation? OPEC+ said that it could reconsider yesterday's decision at short notice if market conditions were to change," Commerzbank (DE:CBKG)'s Carsten Fritsch said.

In addition, OPEC has struggled to follow through with its scheduled output increases and produced less than planned last month.

Markets across assets have been roiled all week by the emergence of the Omicron coronavirus variant and speculation that it could spark new lockdowns and dent fuel demand.

"So far we see no signs of demand weakening on (a) global scale," the JPMorgan (NYSE:JPM) analysts said in a note.

The World Health Organization urged countries to vaccinate their people to fight the virus, saying travel curbs were not the answer.

Switzerland announced stronger anti-COVID-19 measures as its government battles to contain a surge in infections and the arrival of the Omicron variant in the country.

The oil market, meanwhile, seemed unfazed by a much smaller-than-expected increase in U.S. employment in November, likely as millions of unemployed Americans remained home despite companies boosting wages, generous jobless benefits expiring and schools fully reopening.

The market is also looking to this week's Baker Hughes' U.S. rig data at 1 p.m. EST. The oil rig count, an indicator of future production, last week rose for a fifth straight week. [RIG/U]

Separately, global markets should not expect more oil from Iran in the near future.

Indirect U.S.-Iranian talks on salvaging the 2015 Iran nuclear deal teetered on the brink of crisis on Friday as they broke off until next week with European officials expressing dismay at the demands of Iran's new hardline administration.