Below are basic facts about OPEC+ and its role:
What is OPEC and OPEC+?
Iraq, Iran, Kuwait, Saudi Arabia, and Venezuela founded 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 them from the Middle East and Africa, and produces about 30 percent of the world’s oil.
OPEC formed what is known as the OPEC+ alliance with ten of the world’s largest oil exporting countries from outside the organization, including Russia, at the end of 2016.
OPEC+ production represents about 40 percent of global oil production, and the main goal of the alliance is to regulate oil supplies to the global market. It is led by Saudi Arabia and Russia, each of which produces about nine million and 9.5 million barrels per day, respectively.
How does OPEC affect global oil prices?
Exports from OPEC member countries account for about 60 percent of global oil trade. In 2021, OPEC estimated that its member countries owned more than 80 percent of the world’s proven oil reserves.
Given that it has such a large market share, the decisions made by OPEC can affect global oil prices. Its members meet regularly to determine the amount of oil to be sold in global markets.
As a result, oil prices tend to rise when these countries decide to reduce supplies as demand declines, while prices tend to fall when the group decides to pump more oil into the market.
At the last OPEC+ meeting in June, Saudi Arabia pledged to reduce its production by one million barrels per day in July, the largest percentage in the most comprehensive reduction in the OPEC+ alliance to restrict supplies until 2024, as the alliance seeks to boost oil prices, which are declining.
Saudi Arabia has since extended its additional voluntary reduction until the end of this year.
On November 16, oil prices fell about five percent to the lowest level in four months amid concerns about economic growth. It then recovered thanks to expectations that OPEC+ would take measures to support prices.
However, prices largely ignored the rising tensions in the Middle East.
How do OPEC decisions affect the global economy?
Some decisions to cut production have had significant impacts on the global economy. During the 1973 October War, the Arab members of OPEC imposed an embargo on oil shipments to the United States in response to its decision to resupply the Israeli army, and the decision included other countries that supported Israel. The organization also announced production cuts.
The embargo put pressure on the US economy, which was already suffering and dependent on imported oil. Oil prices jumped, causing higher fuel costs for consumers and fuel shortages in the United States. The ban also pushed the United States and other countries to the brink of a global recession.
During the lockdowns related to the Corona pandemic around the world in 2020, crude oil prices declined. As a result, OPEC+ reduced oil production by about 10 million barrels per day, which is equivalent to approximately 10 percent of global production, in an effort to support prices.
What are the member countries of OPEC?
The current OPEC member countries are: Saudi Arabia, UAE, 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 OPEC members, they are Russia, Azerbaijan, Kazakhstan, Bahrain, Brunei, Malaysia, Mexico, Oman, South Sudan, and Sudan.
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