Reuters File Photo: September 28, 2016 OPEC logo before an informal meeting between members of the Organization of Petroleum Exporting Countries (OPEC) in Algeria.
Written by Alex Lawler, Ahmed Gaddar and Oleshia Astkhova
LONDON / MOSCOW (Reuters) – OPEC + ‘s decision to stick to a plan to increase oil production modestly and slowly, despite years of high prices, was partly a cause for concern that demand and prices could weaken, a source close to the group told Reuters.
Another big reason is money. After seeing their revenue slide in the midst of epidemic-induced demand and price declines in 2020, the OPEC + oil-producing alliance led by Russia and top exporter Saudi Arabia is enjoying revenue growth, three OPEC + sources said.
OPEC + has cut production by a record 20 million barrels per day (bpd) or about 10% of global production, following global sanctions to curb the spread of coronavirus.
“Everyone is happy,” the OPEC + representative said of the current oil price level, declining to be identified by name.
OPEC + has faced calls from consumers such as the United States and India for additional supplies this year. Sources said the group was expecting a 1% increase in world production of 800,000 bpd before Monday’s meeting.
But by Monday morning, signals from OPEC + sources changed before that day before their virtual meeting. The most likely outcome was that OPEC would stick to existing plans to increase output by + 400,000 bpd.
“Based on past lessons, OPEC is more cautious, as any hasty decision could bring down oil prices,” OPEC + sources said, explaining the reasons for not increasing output.
“So political pressure from the United States and others has not yet worked to change this strategy.”
Sources say OPEC + is optimistic that prices could reverse rapid gains. This happened in 2018 when it dropped from above $ 85 in October to below $ 50 at the end of the year.
“The oil market is still fragile and there is no guarantee of a stable price,” OPEC + sources said.
Another OPEC + source said before Monday’s meeting that the group was under pressure to increase production quickly, but added: “We are afraid of the fourth wave of Corona, no one wants to take big steps.”
Some members of the group expressed concern that further increases in production could upset next year’s market balance – which OPEC + already sees as surplus – and risked listing above the five-year average in the second half, another source said.
Oil rose above 81 81 on Monday after OPEC + stuck to its plan and rose further after the decision, reaching around 84 84 on Wednesday.
Additional income for OPEC members will help ease the pain of last year’s price decline. According to OPEC’s annual statistics bulletin, petroleum exports earned 32 321 billion in 2020, down 43% from 2019.
Iraqi Oil Minister Ihsan Abdul Jabbar joked at the Energy Intelligence Forum on Wednesday, “Iraqis make up 5 million Iraqis and 5% of our income we depend on oil, we hope it was $ 120! $ 80 a fair price for consumers and producers.