On November 30, 2017, OPEC agreed to continue withholding 2% of the world`s oil supply. This continued OPEC`s policy of November 30, 2016, when it agreed to cut production by 1.2 million barrels. In January 2017, it would produce 32.5 mbd. This figure is still higher than the average level of 32.32 mbd in 2015. The deal liberated Nigeria and Libya. It gave Iraq its first quotas since the 1990s. Russia, which is not a member of OPEC, has voluntarily agreed to cut production. An innovative OPEC oil price band mechanism helped strengthen and stabilize crude oil prices in the early years of the decade. But a combination of market forces, speculation and other factors changed the situation in 2004, driving up prices and increasing volatility in a well-supplied crude oil market. Oil was increasingly used as an asset class.
Prices reached record levels in mid-2008 before collapsing in emerging global financial turbulence and economic recession. OPEC has become important in supporting the oil sector as part of global efforts to address the economic crisis. The second and third OPEC summits in Caracas and Riyadh in 2000 and 2007 identified energy market stability, sustainable development and the environment as three key themes and adopted a comprehensive long-term strategy in 2005. One country joined OPEC, another reactivated its membership and a third suspended it. From 2010 to the present, the global economy was the main risk to the oil market at the beginning of the decade, with global macroeconomic uncertainties and increased risks related to the international financial system weighing on economies. Escalating social unrest in many parts of the world affected both supply and demand in the first half of the decade, although the market remained relatively balanced. Prices remained stable between 2011 and mid-2014 before a combination of speculation and oversupply caused them to fall in 2014. The pattern of trade has continued to change, with demand continuing to grow in Asian countries and to decline in OECD countries in general. Global attention to multilateral environmental issues has begun to intensify, with expectations expected from a new UN-led climate agreement. OPEC continued to strive to ensure market stability and sought to further improve its dialogue and cooperation with non-OPEC consumers and producers.
Approval from a new member country requires the approval of three-quarters of OPEC`s existing members, including the five founders. [123] In October 2015, Sudan formally applied for membership,[124] but is not yet a member. OPEC was formed on September 14, 1960 following a meeting held in the Iraqi capital of Baghdad and attended by the organization`s five founding members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. After the signing of the original agreement establishing OPEC, it was registered with the United Nations Secretariat on 6 November 1962 under UN Resolution No. 6363. In 1971, an agreement was signed between the major oil companies and OPEC members doing business in the Mediterranean, the so-called Tripoli Agreement. The agreement signed on 2 April 1971 increased oil prices and increased the profit shares of the producing countries. [22] As OPEC has been plagued by numerous conflicts throughout its history, some experts have concluded that it is not a cartel – or at least not an effective cartel – and that it has little, if any, influence over the amount of oil produced or its price. Other experts believe that OPEC is an effective cartel, although it has not always been as effective. Much of the debate focuses on the semantics and definition of what constitutes a cartel.
Those who argue that OPEC is not a cartel point to the sovereignty of each member country, the problems inherent in coordinating pricing and production policies, and the tendency of countries to break previous agreements at ministerial meetings. Those who claim that OPEC is a cartel argue that production costs in the Persian Gulf are generally less than 10% of the calculated price and that without OPEC coordination, prices would fall towards these costs. To combat declining revenues from oil sales, Saudi Arabia pushed OPEC in 1982 to audit domestic production quotas in order to limit production and raise prices. When other OPEC countries failed to comply, Saudi Arabia for the first time reduced its own production from 10 million barrels per day in 1979-1981 to just one-third of that level in 1985. As a result, global oil production has risen and prices have fallen significantly, putting OPEC in an awkward position. As recently as June 2016, OPEC decided to maintain a high level of production and, consequently, low prices in order to force more expensive producers out of the market and regain market share. However, starting in January 2019, OPEC cut production by 1.2 million barrels per day for six months, fearing an economic slowdown could lead to a supply glut, and extended the deal for another nine months in July 2019. When OPEC members grew tired of multi-year supply competition with declining yields and declining financial reserves, the organization finally attempted its first production cut since 2008. . .
