Could the OPEC oil market be weakened by the drop in oil prices?
Perhaps this important world oil market as it is the organization of oil exporting countries (OPEC) can have a vision at a global level that it is going through a rather weakened economic and production state.
It is not a crazy idea to think that OPEC is in a weakening process, since due to the pandemic generated by the Covid-19 the demand for oil was considerably reduced so OPEC had to take the decision to make a cut in the oil production of its member countries by 20%.
This action of reducing oil production by 20% has allowed oil prices to recover to a price of $40 per barrel of oil.
There are some variables that combine under this hostile scenario of oil prices to think that OPEC is going through a storm, among the variables that we can name are
The low demand for oil worldwide.
Facing the new stage of energy transition.
OPEC is being seen worldwide as an oil market whose monopoly is being questioned.
Finally, there are rumors that there is discord among its member countries.
Under my perspective and market analysis, I believe that OPEC should not be seen as a market that has gone out of fashion, since certainly under this world crisis as well as other oil markets that have gone into crisis anyway I believe that OPEC continues to be a giant among all the existing markets at present, for me OPEC will continue to have influence on the destiny of oil prices worldwide at present and in the next decades.
To ratify the above, we simply have to assess the historical growth background of its member countries, for example, by the time OPEC was inaugurated it had only five member countries, among which they stand out: Saudi Arabia, Iran, Iraq, Kuwait and Venezuela. However, that list of countries has increased to 13 member countries, with the tendency to add 10 more countries under the agreement of the OPEC+ signatory countries among which Russia could enter as an oil country and influential as a solid economy at the world level.
We cannot think of the OPEC as an oil market weakened only by a fall in oil prices worldwide, because the counterpart is put, we have a strengthened OPEC with the possibility of new member countries that would help strengthen this great world oil market.
There are other very realistic scenarios under which OPEC must face further changes, for example it is estimated that by the year 2020 the demand for oil will drop not only because of the problems of the global pandemic, but there are various scenarios that are compatible with the Paris climate agreement, which aims to keep global warming below 2°C or even 1.5°C.
These environmental agreements and protocols are very necessary for the sustainability of life on the planet, so OPEC should from now on begin to study further adjustments based on these environmental requirements.
One of the economic advantages of a strengthened OPEC today is that it could face a low-cost scenario of up to $10 per barrel of oil, thanks to the fact that member countries such as Saudi Arabia, because they have large oil reserves, could and can resist an era of low prices.
I only hope from you reader friend, that you give me your opinion in the comments about how you see the OPEC oil market, weakened? or on the contrary, strengthened?
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