Concern that demand for oil may weaken in the future was one of the reasons OPEC+ decided to stick with its original agreement to add 400,000 bpd in combined supply to markets instead of responding to calls for additional production, Reuters has reported, citing unnamed sources.
The other reason the cartel stuck to 400,000 bpd monthly was, unsurprisingly, the higher revenues that all oil-producing countries are enjoying because of the oil price rally, the Reuters sources said.
"Everyone is happy," said one of these sources, an OPEC+ delegate. However, a larger supply addition of 800,000 bpd was considered ahead of this Monday's OPEC+ meeting, the Reuters sources also said, adding that eventually, it was dropped in favor of the original arrangement.
"Based on past lessons, OPEC is more cautious because any hasty decision can lead to a sharp drop in oil prices," one source told Reuters. "So the political pressure of the United States and others has not yet been effective in changing this strategy."
Caution is certainly advisable in the current environment. The memory of last year's price crash must still be fresh in OPEC+ memory as it is among U.S. shale drillers, hence the latter's continued production discipline and the former's output decision.
However, what makes OPEC+ happy makes a lot of the world the opposite. India, for instance, a country that depends on imported oil for 80 percent of its consumption, has released oil from its strategic reserves to cushion the price blow to its economy. The United States is considering doing the same to bring prices at the pump lower.
"For us Iraqis, with a 40 million population and we depend on oil for 85% of our revenue, we hope it reaches $120!," Baghdad's oil minister said this week at an industry event, before adding that prices between $75 and $80 a barrel were fair for both producers and consumers.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More