[Reuters]By deciding to leave production unchanged for another month at its meeting on Thursday, Opec+ risks causing the oil market to overheat and creating conditions for more instability in the future. In an environment of rising prices, the group has continued restricting output below its potential level to enjoy a temporary windfall in terms of higher prices. Extra barrels have mostly come from declining compliance among individual Opec+ members with an existing output agreement and a rapid expansion in US shale production. As a group, Opec+ has usually allowed the market to overheat, until accelerating US shale production, decelerating consumption, or both, threaten to push the production-consumption balance into surplus. The petroleum price cycle appears to be repeating itself, with Opec+ opting to continue restricting output rather than respond to falling inventories, rising prices and increasing backwardation.

Source: Standard Digital March 08, 2021 21:00 UTC