OPEC: decision time
Preface
Today, we are expecting decisions made about the global oil supply cut by the OPEC, the US, and Russia. Hence, it makes sense to throw a quick look at the OPEC in the context of the global oil market.
Profile
OPEC is a cartel consisting of oil-exporting countries: it defends the interests of those countries as they are mostly living on crude export profits. Currently, there are 13 countries. Geographically, most of them are located in the Middle East. Production-wise, the biggest outputs are also represented by that region, headed by Saudi Arabia.
Oil reserves
OPEC takes 80% of proven oil reserves globally. Although Venezuela takes the first place, its external political and internal social-economic status will keep its reserves underground in the nearest future. For this reason, Saudi Arabia is a factual #1 in terms of reserves, capacities, and it’s a true leader of the OPEC at the moment.
Oil exports
In terms of the exports, the below map shows the relative strength of the cartel. Countries marked in green are those which are in the OPEC, and numbers correspond to the reported 2018 total oil exports of each state if it was more than 1mln bpd.
Source: OPEC
As you can see, the concentration of numbers in the Middle East and their relative weight in the total sum of the biggest oil producers leaves little doubt: the OPEC has a firm grip on the oil market. While the only few countries which may counter what Saudi Arabia says are the US and Russia (Canadian exports are all consumed by the US, Iraq is normally following suit with the KSA).
While in Vienna
That’s why what will be agreed today at 15:00 MT time will define the oil market in the nearest future. Traditionally, OPEC’s meetings have been held in the Austrian capital city, but as the situation demands, it has to be done remotely. WTI already surged to $27 in hopes of positive outcomes of the meeting.
If the market doesn’t get disappointed and witnesses 10% of global oil supply sealed, oil prices will shoot up. Otherwise, they are likely to plunge in expectation for big troubles ahead.