FILE PHOTO: The OPEC logo is drawn before an informal meeting between the members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers, Algeria on September 28, 2016. Reuters / Ramji Boudina
October 6, 2021
Alex Lawler, Ahmed Ghadar, Olesya Astakhova
LONDON/MOSCOW (Reuters) – Monday’s OPEC+ decision hinges on a plan to moderate gradual oil production, despite prices rising to their first high in years, demand and prices have risen, he told Reuters, a source close to the group, who Weakness may be partly driven by concerns.
Another big reason is money. The OPEC+ oil-producing alliance, led by Russia and top exporter Saudi Arabia, is enjoying a surge in revenues, as demand and prices plummeted during the 2020 pandemic and three OPEC+ sources slashed their revenues.
OPEC+ halted the expansion of oil demand because of the coronavirus and hit prices hard, and again in April 2020 at about 10 million barrels per day (bpd), or about 10% of world output. This has resulted in a record reduction in production.
“Everyone is happy,” said an OPEC+ representative, stating the current oil price level and declined to be identified.
OPEC+ is facing calls for additional supplies this year from consumers such as the United States and India. Sources said ahead of Monday’s meeting, the group was looking at a significant increase to 800,000 barrels per day, which is about 1% of global output.
However, as of Monday morning, the signal had changed from the OPEC+ source to the virtual conference later in the day. The most likely outcome was that OPEC+ would stick to its current plans to increase production by 400,000 barrels per day.
“Based on lessons learned in the past, OPEC is more cautious as a hasty decision could cause oil prices to fall sharply,” said OPEC+ sources, explaining why they will not increase production further. . did.
“Therefore, political pressure in the United States and other countries is not yet effective in changing this strategy.”
According to sources, OPEC+ is aware of the possibility that the price could reverse the bullish momentum. This happened in 2018, when Brent crude oil fell more than $85 in October to less than $50 by the end of the year.
“The oil market is still fragile and there is no guarantee of stable prices,” OPEC+ sources said.
Another OPEC+ source said ahead of the meeting on Monday that the group was under pressure to start production rapidly, but no one wanted to make a big move because they fear a fourth wave of corona. “she added.
A further increase in output could disrupt the market balance next year (OPEC+ already considers it in the black), risking inventories above the five-year average in the second half of the year, according to another source. . Some members of the group have also expressed concern. ..
Oil climbed above $81 on Monday after sticking to the OPEC+ plan, rising further after the decision, reaching nearly $84 on Wednesday.
Additional income from OPEC members will help ease the pain of last year’s price drop. Based on OPEC’s annual data, OPEC earned $321 billion from oil exports in 2020, down 43% from 2019.
“For us Iraqis with a population of 40 million, we depend on oil for 85% of our income, so we expect to reach $120!” Iraqi Oil Minister Isan Abdul Jabbar said on Wednesday. I made a joke in the information forum. $80 was a fair price for consumers and producers.
(Reporting by Alex Lawler and Ahmed Ghadar in London, Olesya Astakhova in Moscow, edited by Jane Merriman)
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