What is OPEC+? How does it influence oil prices
On Tuesday, the United Arab Emirates (UAE), one of OPEC+’s largest producers, announced that it will be leaving the oil producers' coalition on May 1.
OPEC+ is the collective name for the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia. According to estimates by the International Energy Agency, the group produced almost 50% of the world’s oil and oil liquids last year. The UAE is OPEC+'s fourth largest producer.
Here are some facts about OPEC+.
What are OPEC and OPEC+ exactly?
OPEC was established in '1960 by Iraq, Iran Kuwait, Venezuela, and Saudi Arabia in Baghdad with the aims of coordinating oil policies and ensuring fair and stable petroleum prices. It includes 12 countries today, mostly from the Middle East. The UAE joined the group in 1967.
The UAE has been the largest producer to leave OPEC in the last few years. Angola, who joined OPEC back in 2007, left the group at the beginning of 2024 citing disagreements about production levels. Ecuador left OPEC 2020, and Qatar 2019
According to calculations, the group produced more than half of the global crude oil in the 1970s before non-OPEC sources of supply such as the North Sea began to emerge.
In the later decades, OPEC’s share remained between 30 and 40 percent. However, record production growth by rivals like the United States has slowly eaten away at that share. In 2016, OPEC sought to regain its influence by forming a partnership with 10 'non-members', including Russia. It called this alliance OPEC+.
According to the International Energy Agency, this will result in a market share of 51.15 millions bpd or almost 50% of global production. In March, one month after the Iran War, this share dropped to 44%.
US-IRAN GUARDIAN WAR REDUCES UAE PRODUCTION Prior to the U.S. - Iran war, which began at the end February, the UAE produced 3.3 million barrels per day (bpd) and had the capacity to produce up to 4.5-5.0 millions bpd.
In the past, its importance within OPEC was enhanced because it, along with Saudi Arabia, a leading OPEC country, had spare capacity it could add to 'the market if needed.
Since the Iran War, the disruption of the oil market caused by the closure of the Strait of Hormuz has been unprecedented.
According to OPEC, Gulf OPEC+ crude production decreased by almost 8 million barrels a day in March compared with February, as Saudi Arabia and the UAE cut back on their output. Kuwait, Iraq, and Kuwait also reduced their output.
Both have the ability to bypass Strait of Hormuz, but they are limited in their exports.
Saudi Arabia has 7 million barrels per day of pipeline that goes to the Red Sea, while the UAE is able to export 1.5 to 1.8 million barrels per day through a pipe to the port in Fujairah.
OPEC AND GLOBAL OPEC PRICES
OPEC+ claims that it cuts and increases oil production in order to balance the market.
OPEC denies the claims of its critics that it manipulates prices.
During the Arab-Israeli War of 1973, Arab members from OPEC imposed a boycott against the United States as a retaliation to its decision to re-supply Israel's military and other countries who supported?Israel. The embargo prohibited petroleum exports to these nations.
Oil embargo pressed an already stressed U.S. Economy that was dependent on imported crude oil. Oil prices 'jumped,' resulting in high fuel costs and fuel shortages for consumers. The embargo brought the United States, as well as other countries, to the edge of a global economic recession.
Donald Trump, the U.S. president, has accused OPEC of "ripping off" the rest of world by inflating the oil prices. Trump also 'linked' U.S. support for the Gulf to oil prices. He said that while the U.S. defends OPEC, they "exploit" this by imposing high oil prices.
Trump was the one who convinced OPEC+ that they should cut production in 2020 due to COVID, as oil prices plummeted and U.S. producers of oil suffered.
Kpler estimates that OPEC's crude exports will account for 47% of the global seaborne?exports in 2025. Kpler data shows that in March this share fell to?34.7%.
WHICH COUNTRIES ARE MEMBERS OF OPEC?
Saudi Arabia, United Arab Emirates Kuwait, Iraq Iran Algeria, Libya Nigeria Congo Equatorial Guinea Gabon Venezuela are the current members of OPEC. The UAE announced that it would be leaving the group by May 1.
Non-OPEC members of the global alliance OPEC+ include Russia, Azerbaijan and Kazakhstan, Brunei Malaysia, Mexico Oman, South Sudan Sudan and Brazil. They joined early 2025.
Sources: News, World Economic Forum, OPEC, U.S. Department of State, International Energy Agency. (Reporting and editing by Barbara Lewis; Yousef Sabah and Ahmad Ghaddar)
(source: Reuters)
