Members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, meet in what is known as (OPEC +) in Vienna, Austria, on June 4, to discuss common production policy.
The countries of Iraq, Iran, Kuwait, Saudi Arabia and Venezuela established OPEC in 1960 in Baghdad with the aim of coordinating oil policies and ensuring fair and stable prices. The organization now includes 13 countries, most of which are from the Middle East and Africa, and produce about 30% of the world’s oil. They are: Saudi Arabia, the Emirates, Kuwait, Iraq, Iran, Algeria, Angola, Libya, Nigeria, Congo, Equatorial Guinea, Gabon and Venezuela.
As for the countries participating in the “OPEC +” alliance that are not members of OPEC, they are Russia, Azerbaijan, Kazakhstan, Bahrain, Brunei, Malaysia, Mexico, Oman, South Sudan and Sudan.
Addressing the 139th ECB Meeting, OPEC SG HE #HaithamAlGhais underscored the positive contributions made by OPEC Member Countries and non-OPEC oil-producing countries participating in the Declaration of Cooperation to support sustainable stability in the global oil market. pic.twitter.com/Wly3BnrLgM
— OPEC (@OPECSecretariat) May 30, 2023
The following are basic facts about (OPEC Plus) and its role:
What is OPEC Plus?
OPEC’s influence has faced some challenges over the years that have often led to internal divisions, and the global trend towards clean energy sources and reductions in fossil fuel consumption could eventually reduce its dominance.
OPEC formed what is known as the OPEC Plus alliance with 10 of the largest oil-exporting countries in the world outside the organization, including Russia at the end of 2016.
OPEC Plus production represents about 40% of global oil production. The main goal of the alliance is to regulate oil supplies to the global market, led by Saudi Arabia and Russia, each producing about 10 million barrels per day.
This is an additional reason why the @federalreserve has to raise rates in at least two of the next three board meetings—recession or not.
— OPEC News+ (@OPECnews) May 30, 2023
How does OPEC affect global oil prices?
The exports of OPEC member countries account for about 60% of the global oil trade, and in 2021, OPEC estimates that its member countries possess more than 80% of the world’s proven oil reserves.
Because it enjoys such a large market share, decisions made by OPEC can affect global oil prices, and members meet regularly to determine how much oil to sell on global markets.
As a result, oil prices tend to rise when those countries decide to cut supplies as demand declines, while prices tend to fall when the group decides to pump more oil into the market.
And on April 2, OPEC Plus agreed to further production cuts to 3.66 million barrels per day of global demand until the end of 2023.
This helped raise oil prices by about $9 a barrel to more than $87 in the days following the decision, but Brent crude prices have since fallen.
Effects of which will be slim to none due to modern oil market characteristics.
— OPEC News+ (@OPECnews) May 27, 2023
How do OPEC decisions affect the global economy?
Some decisions to reduce production had significant effects on the global economy. During the October War in 1973, Arab members of OPEC imposed an embargo on oil shipments to the United States in response to its decision to resupply the Israeli army.
The decision also included other countries that supported Israel, as the organization announced production cuts, and the pressure of the embargo on the US economy, which was already suffering and dependent on imported oil.
Oil prices have also jumped, causing higher fuel costs for consumers and fuel shortages in the United States, and the embargo has pushed the United States and other countries to the brink of a global recession.
During the closures related to the Corona pandemic around the world in 2020, crude oil prices fell, and as a result, OPEC Plus reduced oil production by about 10 million barrels per day, which is equivalent to approximately 10% of global production, in an effort to support prices.
2023-06-01 12:18:32
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