OPEC strategy still a winner?

Given that the fact crude oil price took a dive at the end of 2018, OPEC’s strategy to stabilized the market looks a bust. However, from the cartel’s member perspective, which is the petroleum revenues, it’s still a winner.

Now that the crude oil prices in London have sunk to relatively similar range prior to the production cut ($ 50-60 per barrel), as record U.S. oil output and shaky demand seems to counter OPEC efforts. As for many of its member, the price range is below the required levels where they need to balance their government budgets.

However, relative to the price slide, even though an alarming sign, the previous strategy of output restraint has continued to deliver what matter most to them. That’s higher revenue for their crude oil export reliant economies.

According to Bloomberg calculation, the nominal value of the group’s production is approximately$ 826 Billion. Although it is important to note that, actual revenues are supposed to be calculated from actual export volume rather than produced volume.

As for 2019, we’ll have to see whether the same approach would have the same impact. And at the moment, prices have had a rocky start for 2019 as increased u.s. shale oil production weaken the global market.

And if the slump continues, the organization could, as one of key producer suggested, double-down on the strategy by cutting output even further. Or it might even consider the strategy of 2015-2016 of pumping at full-capacity.

But staying the course might be the best bet, even if the current prices doesn’t go higher than, OPEC might on track to earn more relative to last year.

Or if they opt to increase their production at full capacity, it might be a case of “Tulip Mania’ , something which was highly valuable loss 90% of its value overnight.

Who knows what might happen in 2019, it’ll be interesting.


Categories: Oil & Gas News


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: