OPEC’s 43% Revenue Plunge Helps Explain Strict Supply Policy

(Bloomberg) -- The ascetic approach taken by OPEC and its allies in restoring oil production becomes easier to understand when you look at last year’s accounts.

The OPEC+ alliance is using modest monthly increments to return the vast swaths of output shuttered in 2020, even as fuel demand bounces back rapidly from the pandemic. Its gradual pace has helped foster a rally in crude prices, which hit $80 a barrel this week. 

Data released by OPEC on Thursday help explain why producers are so cautious: the Organization of Petroleum Exporting Countries suffered a 43% plunge in revenues when the Covid crisis crushed demand last year. It earned $321 billion from petroleum exports, less than half the amount enjoyed in 2018, according to the group’s Annual Statistical Bulletin.

With oil markets tightening amid the global crunch in energy supplies, several industry voices have said that OPEC+ needs to speed up the pace of output resumption. It could be in the cartel’s interest to heed those calls, as rallying prices threaten to curtail fuel demand and give a lifeline to the group’s rivals. 

Nonetheless, key members of the alliance have signaled they’re content with the current tempo, and a quick look at 2020’s bottom line makes that more comprehensible: there’s a long way to go before they make up last year’s financial losses.

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