Despite multi-year high crude oil prices and pressure from the US to help cool the market, OPEC and its oil-producing allies (OPEC+) have decided to hold firm on current production plans of increasing 400,000 b/d for December 2021.
“The decision was made previously to increase production by 400,000 b/d every month, and I underscore every month, until the end of 2022. Today the decision was reiterated to maintain current parameters which were decided on earlier,” said Russian Energy Minister Alexander Novak.
Novak also explained why OPEC+ has chosen not to add more oil. “There are some signs of decreased oil demand in the European Union in October. Global oil demand is still under pressure from the Delta COVID variant.”
US President Joe Biden recently urged major G20 energy producers with idle capacity to increase production to ensure a stronger recovery in the global economy. OPEC+ sources said that the US has enough capacity to increase production on its own if it wants to help the world accelerate economic recovery.
“The current demand-supply mismatch has pushed oil prices above $80/bbl Brent for more than a month, which has been a short-term boon for OPEC+ producers but pain for consumers, in particular countries worried about inflation and post-pandemic economic growth,” said Louise Dickson, a senior oil markets analyst at Rystad Energy.
“China has already responded to high commodity prices by releasing volumes of strategic petroleum reserves, and the US is discussing a similar maneuver, so if OPEC+ stays conservative, the market could expect some reactionary releases from the US and China,” she concluded.