The refusal of the Organisation of Petroleum Exporting Countries (OPEC) to impose production limits on its members has dimished clout. and an evolving global marketplace signal diminished its clout for the oil cartel.
According to Africa-ME report, OPEC ministers’ failure to agree on production limits to bolster oil prices early this month, was yet another signal that the days of oil cartel’s dominance in the global market are over.
Members of the OPEC may continue to be important players in the oil markets, but the cartel has lost its priveledge ability to to control global oil prices. “according to Global Risk Insights, which accesses political and business risk around the world, the report said.
OPEC nations, led by Saudi Arabia, traditionally have been the world’s swing oil producers, with enough reserves and daily production to control the price of oil. But that has changed in recent years as the United States, Russia and other smaller non-OPEC countries increased production.
Total OPEC production is about 37 million barrels a day compared to non-OPEC production of nearly 57 million barrels daily, according to Global Risk Insights.
Despite waning influence, OPEC’s refusal to set production limits has played a major role in creating an oil glut, precipitating a two-year crisis that has seen the price of oil drop to as low as $26 per barrel earlier this year before climbing to $52 this month. That compares to prices of about $110 per barrel in 2014, when the crisis began.
Some OPEC nations, led by Saudi Arabia, have been willing to absorb the financial shocks of plummeting oil prices in order to preserve market share, reasoning that the low prices would drive competitors, notably U.S. shale oil producers, out of business.
OPEC has rebuffed calls to limit production by members Algeria and Venezuela, which have been hard hit by the slump. Saudi Arabia itself has not been immune to the financial impact of low oil prices.
The Gulf nation has spent more than $150 billion of its reserves in less than two years and posted a deficit of $98 billion last year. Earlier this year, the Saudis borrowed $10 billion from a consortium of international banks, its first foreign debt in 25 years. The government also was considering asking creditors to take IOUs because it cannot pay its bills.
