OPEC and a group of Russia-led oil producers agreed to continue pumping more crude, betting that pent-up demand in a post-lockdown world will outweigh any hit to economic activity by the recent permutations of Covid-19.

The Organization of the Petroleum Exporting Countries and allied producers led by Russia said Thursday they would raise their collective production by another 400,000 barrels a day in January. The group agreed earlier this year to boost output in such increments each month until production reaches pre-pandemic...

OPEC and a group of Russia-led oil producers agreed to continue pumping more crude, betting that pent-up demand in a post-lockdown world will outweigh any hit to economic activity by the recent permutations of Covid-19.

The Organization of the Petroleum Exporting Countries and allied producers led by Russia said Thursday they would raise their collective production by another 400,000 barrels a day in January. The group agreed earlier this year to boost output in such increments each month until production reaches pre-pandemic levels.

The White House had put pressure on the group to accelerate that pace. Many market watchers, meanwhile, expected the group, which calls itself OPEC+, to pause in opening taps any wider. That expectation came amid the uncertain economic impact of new travel bans going up to curb the Omicron variant and fresh lockdowns in places like Europe, which is suffering through another wave of the older, Delta variant.

Saudi Arabia and Russia had previously debated such a pause, The Wall Street Journal reported, after the U.S. released stockpiled oil into the market in a bid to lower prices.

Prices fell immediately after the OPEC+ decision, as traders weighed the prospect of more supplies at a time when oil markets had already weakened dramatically. Crude prices have fallen sharply in the days after the World Health Organization called Omicron a variant of concern.

Scientists are scrambling to find out whether vaccines will be as effective against the strain, how transmissible it is and whether its symptoms are any worse than previous strands. All that has triggered rapid-fire travel bans and restrictions around the world, threatening once again economic growth and, by extension, oil demand.

The move by the producers initially drove Brent, the international benchmark, and U.S. crude down by about 2%, before prices recovered. Brent settled 1.2% higher at $69.67 a barrel and U.S. crude added 1.4% to $66.50 a barrel.

Part of the bullishness: In an unusual move, OPEC+, in a release detailing its decision, said its session would remain open, a technical move that would allow the group to reconvene quickly and change course if the Covid-19 situation changes dramatically.

In its Thursday session, OPEC+ bet on the prospect of increased demand despite any knock from the Omicron variant. Before going into the meeting, the Saudis and Russians had played down the economic ramifications of the Omicron variant. Russia has long pushed the group to open up the taps, to allow its oil producers to sell as much crude as they can.

Privately, though, Saudi officials worried that the new strain could hit demand and prices, according to people familiar with their thinking. The United Arab Emirates, meanwhile, had pushed inside OPEC to continue pumping more crude.

The OPEC+ decision was a win for the Biden White House, and came after intense public and private lobbying. Washington has for months pleaded with Saudi Arabia to open the taps wider amid fast-rising U.S. gasoline prices that have become a political liability. Frustrated by previous moves by OPEC to ignore that plea, Washington, alongside a limited number of other countries, released early last week stockpiled oil from its strategic petroleum reserve in an attempt to lower prices. Washington has also said it could do so again, threatening to swell global supplies.

The stockpile release didn’t soften prices, but the identification of the Omicron variant just a few days later, did. Prices fell more than 10% in the days following the WHO’s designation of Omicron as a variant of concern.

White House press secretary

Jen Psaki welcomed Thursday’s OPEC+ decision. She said “we appreciate the close coordination over the recent weeks with our partner Saudi Arabia, the U.A.E. and other OPEC+ producers to help address price pressures.”

Kathleen Kelley, the head of New York advisory firm Queen Anne’s Gate, said some of the oil price gains Thursday could be related to an apparent detente between Riyadh and Washington over the issue. The price rise “shows greater cooperation with the U.S. and so maybe no more” strategic petroleum reserve releases, she said.

Outside analysts have questioned whether the group can pump as much as it says it will. With production in Russia and many African countries participating in the pact reaching peak levels, the group might be able to increase output by only about 250,000 barrels a day, said Christyan Malek,

head of oil-and-gas research at JPMorgan. Most of that will come from OPEC producers in the Persian Gulf, he said. Still, he said, the move “shows OPEC+’s confidence that the impact of Omicron will be short-lived.”

Saudi Arabia and Russia have led OPEC and a group of other oil-producing countries in coordinating output closely amid a demand shock last year caused by the pandemic. The two oil powers mended fences over a price war early last year and convinced partners to cut their collective output sharply—equivalent to almost 10% of the world’s demand—to prop up prices. Since then, they have been meeting almost every month to weigh up supply and demand.

—Joe Wallace
contributed to this article.

Write to Summer Said at summer.said@wsj.com and Benoit Faucon at benoit.faucon@wsj.com