Counter-intuitive: Why OPEC is pushing for lower oil prices

The answer goes beyond punishing over-producers of oil like Iraq

- Javier Blas

Cartels have one—and only one—reason d'être: push prices higher. OPEC, the most famous of all of them, is a textbook example. So why is Saudi Arabia, which leads this group of oil producers, driving prices down?

Ostensibly, the kingdom is trying to re-establish discipline among rogue producers: Kazakhstan, Iraq and the UAE are cheating on their output targets. To force them to relent, Riyadh has been voting at OPEC+ meetings for higher production for the whole group, hoping that the ensuing price decline forces the cartel's troublemakers to fall in line.

The explanation makes a lot of sense. First, because the cheating is real, it's getting worse and the unruly countries have ignored warnings. Second, because Saudi Arabia has done it before, launching price wars against OPEC cheaters in 1985-86, 1998 and 2020.

Yet, I remain unconvinced that's all there's to it.