The OPEC turns 60 today, i.e. September 14. The year has been one of the most difficult and volatile ones for oil-producing and exporting countries.
The OPEC turns 60 today, i.e. September 14. The year has been one of the most difficult and volatile ones for oil-producing and exporting countries. The crude oil prices were struck by a demand collapse in March and April due to the COVID-19 led lockdowns and plummeted into a negative.
The sell-off also came at a time when Saudi Arab and Russia failed to resolve the issue if output cuts. OPEC asked Russia for a production cut equalling 1.5 percent of world supply, which Russia rejected. Russia defended its stance citing the rising US shale output. Eventually, this ended the 3-year partnership between the OPEC and Russia. The result was an output cut of 2.1 million bpd which ended in March 2020. The prices crashed into negative on April 20 and the cartel and the allies agreed to cut a record 9.7 million bpd, equal a whopping 10 percent of global output to prop up prices.
The OPEC was founded by 5 members, Venezuela, Saudi Arab, Iraq, Iran, Kuwait and now has a total of 13 members with inclusion of Qatar, UAE, Algeria, Nigeria, Ecuador, Gabon, Angola, Congo, Equatorial Guinea. The OPEC as an organization has seen a lot of rifts, fortunes made and lost, the Iran–Iraq war, civil unrest and price volatility but it has survived it all.
OPEC has become an indispensable partner and friend to the consumer nations like India. Price stability is important for consumers and producers countries as to various sectors from the industry from airlines to chemicals. All need predictability to plan investments and production.
In 2008, when crude oil prices hit record highs of $150 a barrel, Saudi Arab released crude oil to ease prices, and then in April this year when prices hit a negative $32 a barrel, the cartel and Russia went for a historic cut of 9.7 million barrels per day.
Even as the US global oil market share has doubled in the past decade and it has been at the OPEC ‘s expense, the two have a much better relationship than before. Founded in 1960 to counter the power of seven US and British oil companies, the OPEC now has repeatedly yielded to pressure from Washington to pump more oil since U.S. President Donald Trump took office at the start of 2011.
On the occasion of 60th year, in a release to CNBC-TV18, Mohammad Sanusi Barkindo, OPEC Secretary-General said, “I often think back to that day in 1960, the mood in Baghdad, how those visionaries envisaged the future of OPEC and the oil industry. What is clear is that what was set in motion has stood the test of time; OPEC still has the same core objectives, of order and stability in global oil markets, but its role has also broadened considerably, in terms of deeper cooperation with other producers, dialogue with a host of industry stakeholders, and an embrace of human concerns such as sustainable development, the environment and energy poverty eradication.”
"We remain focused on a balanced and stable oil market, in the interests of both producers and consumers, as most recently exhibited through the Declaration of Cooperation and the historic production adjustments of 2020," he added.
First Published: IST