OPEC Membership, Organization, History, & Facts

In December 2016, OPEC formed an alliance with other oil-exporting nations that were not a part of the organization, creating an entity that is commonly referred to as OPEC+, or OPEC Plus. Prominent members of OPEC+ include Russia, Mexico, and Kazakhstan. Working in coordination with additional oil-exporting countries makes the organization even more influential when it comes to international energy prices and the global economy. OPEC faces considerable challenges from innovation and new, green technology.

However, starting in January 2019, OPEC reduced output by 1.2 million barrels a day for six months due to a concern that an economic slowdown would create a supply glut, extending the agreement for an additional nine months in July 2019. The term Organization of the Petroleum Exporting Countries (OPEC) refers to a group of 13 of the world’s major oil-exporting nations. https://www.topforexnews.org/ OPEC was founded in 1960 to coordinate the petroleum policies of its members and to provide member states with technical and economic aid. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.

Organization and structure

This means that the country has control over its own production and supply without any interference from the organization. In 1976, OPEC established the OPEC Fund for International Development. Member countries work with developing nations https://www.dowjonesanalysis.com/ and the international community to provide private and trade sector financing and grants to non-member countries. Some of the world’s greatest oil-producing countries, such as Russia, China, and the U.S., do not belong to OPEC.

1. As a result, worldwide oil production increased and prices dropped significantly, leaving OPEC in a delicate position.
2. OPEC members coordinate policies on oil prices, production, and related matters at semiannual and special meetings of the OPEC Conference.
3. Qatar’s departure means the country is aligning itself more with the United States than with Saudi Arabia.
4. Those who claim that OPEC is a cartel argue that production costs in the Persian Gulf are generally less than 10 percent of the price charged and that prices would decline toward those costs in the absence of coordination by OPEC.
5. Venezuela, on the other hand, has the largest reserves but produces only a fraction of what Saudi Arabia produces.

If Riyadh continues to pursue a more assertive foreign policy, it could be a challenge for the cartel to remain cohesive. For OPEC and its newfound partner Russia, this possibility, combined with the rise of shale oil, increasing U.S. energy independence, and global efforts to fight climate change, portend a prolonged period of uncertainty. OPEC’s main goal is to maintain https://www.forexbox.info/ oil prices at a profitable level for its members while keeping the market as free as possible from restrictions. The organization ensures its members receive a steady stream of income from an uninterrupted supply of oil. The percentage of crude oil reserves held by OPEC countries in 2021. It rejoined in January 2016 but left after the OPEC conference in November 2016.

Qatar terminated its membership on Jan. 1, 2019, and Indonesia suspended its membership on Nov. 30, 2016, so as of 2020 the organization consists of 13 states. Members admitted afterward include Qatar (1961), Indonesia (1962), Libya (1962), Abu Dhabi (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Equatorial Guinea (2017), and the Republic of the Congo (2018). The United Arab Emirates—which includes Abu Dhabi (the largest of the emirates), Dubai, ʿAjmān, Sharjah, Umm al-Qaywayn, Raʾs al-Khaymah, and Al-Fujayrah—assumed Abu Dhabi’s membership in the 1970s. Gabon, which had joined in 1975, withdrew in January 1995 but rejoined in 2016. Daniel H. Yergin’s books The Prize and The Quest look at the modern history of the oil and gas industries and their intersection with international politics. Longer term, the advent of electric vehicles that run on renewable energy resources represents an existential threat to OPEC.

Delegations are usually led by the oil ministers of each member country, and a secretary-general appointed by the bloc is entrusted with the day-to-day management of the organization. There are several advantages of having a cartel like OPEC operating in the crude oil industry. First, it promotes cooperation among member nations, helping them alleviate some degree of political hostilities. And because the organization’s main goal is to stabilize oil production and prices, it is able to exert some influence over production from other nations. Collectively, OPEC is the largest producer and exporter of crude oil and petroleum products in the world.

OPEC summary

Analysts predicted the cut would return prices to $70 a barrel by early fall 2019. In November, average global prices for Brent crude oil had dropped to under $58 bpd. They believed higher U.S. supplies would flood the market with supply at the same time slowing global growth would cut into demand.

For example, Iran and Iraq waged an eight-year-long war that led to hundreds of thousands of deaths. While Iran accused its Arab neighbors of holding oil prices artificially low to help Iraq, neither Iraq nor Iran left OPEC, which remained officially neutral. As one area in which OPEC members have been able to cooperate productively over the decades, the organisation has significantly improved the quality and quantity of information available about the international oil market.

During the 1990s OPEC continued to emphasize production quotas. Having reached record levels by 2008, prices collapsed again amid the global financial crisis and the Great Recession. Meanwhile, international efforts to reduce the burning of fossil fuels (which has contributed significantly to global warming; see greenhouse effect) made it likely that the world demand for oil would inevitably decline.

This is especially helpful for a natural-resource industry whose smooth functioning requires months and years of careful planning. Qatar left in January 2019 to focus on natural gas instead of oil. Qatar’s departure means the country is aligning itself more with the United States than with Saudi Arabia. U.S. officials stopped Saudi Arabia from invading Qatar in 2017, investigative website The Intercept reported.

The chief executive officer (CEO) of OPEC is its secretary-general. His Excellency Mohammad Sanusi Barkindo of Nigeria was appointed to the position for a three-year term of office on June 2, 2016, and was re-elected to another three-year term in July 2019.

2020: production cut and OPEC+

These countries realized they had a nonrenewable resource. If they competed with each other, the price of oil would drop too far. They would run out of the finite commodity sooner than they would if oil prices were higher.

Demand for oil dropped during the global crisis, which began in 2020. Producers had an overabundance in supply with no place to store it, as the world experienced lockdowns cutting down demand. This, along with a price war between Russia and Saudi Arabia, led to a drop in oil prices. As a result, the organization decided to cut production by 9.7 million barrels per day between May and July 2020. Oil prices continued to experience volatility, leading OPEC to adjust production levels to 7.2 million barrels per day as of January 2021.

Roughly 40% of the world’s oil production and 60% of the world’s petroleum market come from the group’s member countries and they accounted for more than 80% of the world’s proven oil reserves in 2021. OPEC waited to cut oil production because it didn’t want to see its market share drop further. The cartel toughed it out until many of the shale companies went bankrupt. The 2020 Russian-Saudi price war demonstrated the vulnerability of U.S. producers. As the price of oil fell to its lowest point in nearly two decades, it further stressed a U.S. industry already grappling with the effects of the pandemic; at least one major U.S. shale producer, Whiting Petroleum, declared bankruptcy. OPEC members with relatively high breakeven prices, such as Algeria, are also more exposed to sustained low oil prices than Russia or Saudi Arabia, which both have low breakeven prices and significant foreign exchange reserves.