What is OPEC+ and how is it different from OPEC? U S. Energy Information Administration EIA - Daddy Tv

Keep reading to learn more about OPEC and its history, and explore how the organization influences global oil prices. OPEC stands for the Organization of the Petroleum Exporting Countries. As the name suggests, OPEC is made up of 13 of the world’s largest oil-exporting countries that work together to coordinate international oil prices and policies. Formed in 1960, OPEC has invested billions of dollars in drilling platforms, pipelines, storage terminals, and shipping. When prices are higher than $80 a barrel, other countries have the incentive to drill more expensive oil fields.

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Besides permanent members, OPEC also has several so-called observers, oil-producing countries that attend OPEC meetings. Among these countries are Egypt, Mexico, Norway, Russia and Oman. But Saudi Arabia, the largest contributor to OPEC’s oil output, is considered the de facto leader of the organisation. However, the G7 group of nations is trying to keep Russia’s oil revenues low by imposing a price cap of $60 a barrel on the oil that it exports.

1. Current OPEC members are[ref] Algeria, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela.
2. Saudi Arabia pushed for OPEC+ members to reduce production at a meeting in Vienna in early March.
3. The cutback in demand for crude oil is also weighing on the 13-member organization.
4. On December 7, 2018, OPEC agreed to cut 1.2 million barrels per day.
5. Among these countries are Egypt, Mexico, Norway, Russia and Oman.

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After Russia invaded Ukraine, EU countries stopped importing Russian oil transported by sea, and countries such as the US and UK stopped buying it altogether. One of the members of the expanded group is Russia, which also produces more than 10 million barrels a day. On July 1, 2019, members agreed to maintain the cuts until the first quarter of 2020. Complete digital access to quality FT journalism with expert analysis from industry leaders. Short, timely articles with graphics on energy, facts, issues, and trends.

OPEC’s role in the world’s oil industry

The organization is designed to “coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets.” This ensures that there is a steady supply for consumers and regular income for petroleum producers. Russia contributed to about 12% of global crude oil production in 2023, making it the third biggest crude producer in the world, according to Statista. By increasing or reducing oil production, OPEC controls oil supply, which means it can increase or reduce the price of oil. The cutback in demand for crude oil is also weighing on the 13-member organization. The group only exported 25.1 million barrels per day for the month of November 2020, a drop of 2.4 million barrels per day averaged over the second quarter of that year. As a result, OPEC cut its forecast for demand by 1 million barrels a day for the first quarter of 2021.

Vast reserves of U.S. shale oil have not completely insulated American consumers from OPEC-induced price swings. Changes in U.S. production levels are the result of dozens of private energy companies’ independent decisions, and it can take months before consumers feel any adjustments. That means when there are sudden changes in market conditions, OPEC can gain substantial, if brief, market power to influence prices. OPEC’s worst-ever crisis, according to energy expert Daniel H. Yergin, was Iraq’s 1990 invasion of Kuwait. In his book The Prize, Yergin writes that for the first time “sovereignty and national survival and not merely the price of oil” were at stake. The invasion removed four million barrels of oil from the world market and caused prices to jump.

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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. OPEC’s membership expanded to 10 countries in 1969 and was an organization that flew under the radar until Arab member countries cut production and banned exports to the United States and the Netherlands. The embargo was a response to the West’s support of Israel during the Yom Kippur War in October 1973. The Kremlin has generally complied with OPEC’s guidance, and during a series of cuts in March, President Vladimir Putin backed the OPEC+’s efforts to maintain oil prices but voiced worries over losing market share to the US.

But new technologies have allowed American producers to tap into previously trapped oil at decreasing cost, leading the United States to become the world’s largest oil producer in recent years. Production fell in 2020, as measures to contain the COVID-19 pandemic reduced oil demand, but it has since rebounded. And although Biden has pledged to prohibit new drilling on federal lands, his administration has continued to approve what is relevant cost permits at a record pace. OPEC faces considerable challenges from innovation and new, green technology. High oil prices are causing some oil-importing countries to look to unconventional—and cleaner—sources of energy. These alternatives, such as shale production as an alternative energy source, and hybrid and electric cars that reduce the dependence on petroleum products, continue to put pressure on the organization.

OPEC’s decisions have a significant impact on future oil prices, so it’s important to learn how it works. The influence of individual OPEC members on the organization and on the oil market usually depends on their levels of reserves and production. Saudi Arabia, which controls about one-third of OPEC’s total oil reserves, plays a leading role in the organization. Other important members are Iran, Iraq, Kuwait, and the United Arab Emirates, whose combined reserves are significantly greater than those of Saudi Arabia. Kuwait, which has a very small population, has shown a willingness to cut production relative to the size of its reserves, whereas Iran and Iraq, both with large and growing populations, have generally produced at high levels relative to reserves. Revolutions and wars have impaired the ability of some OPEC members to maintain high levels of production.

Other members of the oil producers’ group Opec+ agreed to keep their output levels unchanged, having made cuts of more than one million barrels a day last April. Many non-OPEC members also voluntarily adjust their oil production in response to OPEC’s decisions. In the 1990s, they increased production to take advantage of OPEC’s restraints. These cooperating non-OPEC members are Mexico, Norway, Oman, and Russia. In 1960, five OPEC countries allied to regulate the supply and price of oil. If they competed with each other, the price of oil would drop too far.

Still, analysts say that U.S. shale production, which collapsed during the pandemic-induced price slump, will take months to significantly increase. Biden has reportedly been mulling a visit to Saudi Arabia, and in March, senior U.S. officials made their first trip to Venezuela since Washington cut diplomatic ties with Caracas https://www.1investing.in/ in 2019. The most prominent challenge to OPEC today comes from unconventional oils, such as shale-based energies, that have become available through recent technological advancements. In 2009, after a nearly forty-year decline in U.S. crude oil production, shale and sand-based oil extraction helped ramp up output.

Sure enough, once oil prices got closer to $100 a barrel, it became cost-effective for Canada to explore its shale oil fields. U.S. companies used fracking to open up the Bakken oil fields for production. On November 30, 2017, OPEC agreed to continue withholding 2% of global oil supply.