Is OPEC The Real Leader Of Global Oil Prices?

Is OPEC The Real Leader Of Global Oil Prices

The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization (IGO) which includes 14 countries, founded in 1960 in Baghdad by the top five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela). The famous IGO has been headquartered in Vienna, Austria, since 1965.

As of September 2018, the 14 member states accounted for about 44 percent of world oil production and 81.5 percent of the world's "proven" oil reserves, giving OPEC a significant impact on global oil prices, along with the so-called "Seven Sisters" grouping Multinational oil companies.

The stated mission of the Organization is to "harmonize and standardize petroleum policies of its member countries and to ensure the stability of oil market, in order to secure an efficient, economical and regular supply of oil to consumers, a steady income for producers, and a fair return on capital to those who invest in the Petroleum industry.

OPEC Members

The oil cartel is also the main provider of information on the international oil market, where the current OPEC members are: Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Republic of the Congo, Saudi Arabia (actual leader), United Arab Emirates, and Venezuela. Indonesia and Qatar are former members.

There is a total of 14 OPEC member States. There are two in South America, 5 in the Middle East and seven in Africa. 

Qatar left OPEC on January 1, 2019, after joining the organization in 1961, to focus on the production of natural gas, as the small gulf country is the largest liquefied natural gas exporter in the world.

Impact of OPEC on oil prices

The organization purpose through the years is to improve the quality and the quantity of resources and how to use it at its best.

OPEC members provide about 43.5% of the world's crude oil production. OPEC members control together about 81.9% of total global fixed reserves.

OPEC member countries control the market and collectively decide to lift or reduce oil production in order to maintain prices and stable supply.

A unanimous vote is required to lift or reduce oil production Each Member State controls its oil production, but OPEC aims to harmonize production policies in the Member States.

Oil and energy ministers from OPEC member countries usually meet twice a year to determine OPEC's production level. They also meet in special sessions whenever necessary.

OPEC and non-OPEC member, led by Russia, have an output cut agreement by 1.2 million barrels per day (bpd) from Jan. 1 and expires at the end of June.

OPEC+ members will convene in coming weeks to decide their next move, amid request from several members to extend the deal beyond June.

The aforesaid production-cut deal managed to push Brent crude futures prices from $54.12 a barrel in January this year to a peak of $75.60 in April. 

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