Page 11 - Oil

THE ROLE OF OPEC Saudi Arabia is the largest producer, contributing almost one-third of total OPEC oil production and has more authority and influence than the other countries. There OPEC is a permanent, intergovernmental Origin are also cooperating non-OPEC members Organization. OPEC is short for The who voluntarily adjust their oil production Organization of the Petroleum Exporting OPEC was founded in September, 1960 at the in response to OPEC's decisions. They are Countries. As per its Statute*, the mission of Baghdad Conference following an agreement Mexico, Norway, Oman, and Russia. OPEC is as follows: signed by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, the Founder Members of the What’s new with OPEC? • To coordinate and unify the petroleum Organization. policies of its Member Countries In the recent years, OPEC's share of world oil • Ensure the stabilization of oil markets in These countries were later joined by Qatar production has declined mainly due to the order to (1961), Indonesia (1962), Libya (1962), the new production coming from the United • Secure an efficient, economic and United Arab Emirates (1967), Algeria (1969), States and Canada. regular supply of petroleum to Nigeria (1971), Ecuador (1973), Gabon (1975), consumers Angola (2007) and Equatorial Guinea (2017). OPEC and non-OPEC producers have agreed • A steady income to producers and Indonesia’s membership has been suspended to cut production by 2% translating to 1.8 • A fair return on capital for those as of 2016. million Barrels per Day (BPD) from January investing in the petroleum industry. 2017 to March 2018. If this production cut The importance of OPEC deal is extended, it would likely be bullish * The Statute stipulates that “any country for oil prices. In case the deal isn’t extended, with a substantial net export of crude it could lead to a rise in production from petroleum, which has fundamentally similar OPEC controls 61 percent of the world's oil Iran, Libya, and Russia and pressure oil interests to those of Member Countries, may exports and holds 80 percent of the worlds prices. become a Full Member of the Organization, proven oil reserves. OPEC's decisions have if accepted by a majority of three-fourths a huge impact on future oil prices. One of Full Members, including the concurring mechanism OPEC uses to achieve its influence votes of all Founder Members.” is something called the quota system. Here, individual members must follow pre- established production quotas. Historically, crude oil prices have seen increases whenever OPEC production targets are reduced. 07 OIL IN THE FINANCIAL MARKETS 08