One of the world’s most powerful groups of oil producers is the Organization of the Petroleum Exporting Countries, known as OPEC+. The organization has decided to impose drastic output cutbacks on oil production as a way to boost oil prices, despite pleas from the United States to pump more oil. On Wednesday, OPEC+ made the final decision to cut oil production by 2 million barrels per day starting in November.
globalEDGE Blog - By Tag: opec
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The past two years have been crazy for many industries, including the oil market. Crude oil was sliding into the negatives early on in the pandemic; however, the price has surpassed $100 per barrel recently. The global benchmark, Brent crude oil, was trading above $130 per barrel this past week. Since gas prices primarily depend on oil prices, there has been a significant increase in gas prices worldwide. Many reasons led to this increase, some weighing more than others.
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Qatar, a small, wealthy country in the Middle East, announced its resignation from the Organization of the Petroleum Exporting Countries (OPEC) on December 3rd. OPEC is the most powerful oil cartel in the world, holding a near monopoly over the oil industry that allows the group--which now consists of 14 countries, most notably of which are Saudi Arabia, the UAE, Iraq, and Iran—to exercise nearly complete control of oil prices and production. Russia also holds an alliance with OPEC, more specifically with Saudi Arabia, and shares an influence on the oil market.
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Shrinking supplies from Iran, along with strong global growth has led to a bullish sentiment in future oil prices. Crude oil has rallied for four straight weeks and speculators are purchasing bullish oil options as a result. A reason for the speculation revolves around OPEC members and their inability to make up for production shortfalls amid political turmoil.
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In December 2016 Nigeria once again became Africa’s top oil producer, producing just over 1.75 million barrels of oil per day. Before December, Angola had been Africa’s largest oil producer. Both countries are members of OPEC, the Organization of the Petroleum Exporting Countries, and in late 2016 OPEC agreed to cut their total oil production by 1.2 million barrels a day starting in January 2017 to keep oil prices at a stable point. Up to this time, however, Nigeria continued to increase their own production of oil. This is because Nigeria was exempted from cutting their oil production in the OPEC agreement. Many Nigerian oil facilities were attacked by militant groups upset with the current distribution of the profits the government makes off of their oil exports. Because of this Nigeria’s oil production has already decreased in 2016.
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Today, the Organization of the Petroleum Exporting Countries (OPEC) will be conducting a highly anticipated meeting regarding the future production of oil and its prices. The main issue the meeting will focus on is the amount of oil supplied by members of OPEC, with an emphasis on the leading oil producing countries in the group. Investors are anxiously awaiting the outcome of the OPEC decision to potentially cut oil production globally. Outcomes of the previous meeting conducted in Algiers seemed hopeful, as the majority of OPEC members agreed to cut as much as 2 percent of their total oil production.