Could the OPEC oil market be weakened by the drop in oil prices?

in Project HOPE4 months ago

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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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Hello carlos84!

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Greetings friend @ carlos84 for showing this great information about the OPEC market, your standards, how influential your market is, whether it is to set the price of the barrel and above all, what impact it has on the economy of the producing countries.

Certainly the OPEC market is very influential for other markets and in the international price of oil. Greetings and thank you for this comment.

I certainly do not think that we should think of OPEC as a market weakened only by the fall in oil prices, these scenarios are a constant possibility and this organization should be prepared to handle them, what is important is to consider the agreements on climate change, I think that these would pose new schemes that will require a strengthened OPEC to face new realities.

As you say friend @emiliomoron, OPEC is a strengthened market that will have to face new scenarios in which reinventing new models will be the success in the future for this market.

I agree with you that those protocols that you mention environmental are necessary for the sustainability of our planet and to preserve life on it, it would be very important to study new strategies to put these environmental processes into operation, which would be profitable for the economy. of an OPEC and at the same time it would be strengthened and could face the low costs and the fragility that the oil sector presents today. Greetings friend @ carlos84 Thank you for sharing your article.

I certainly believe, my friend @sandracarrascal, that OPEC must face this new scenario of environmental preservation. Greetings and thanks for commenting.

Greetings friend @carlos84, as usual a passionate topic that you share with us in this opportunity related to the market of the Organization of Petroleum Producing Countries (OPEC), this important organization is well known worldwide for its action on the prices of hydrocarbons, however, on this occasion undoubtedly the low prices of crude oil have a negative impact on the market of this important organization, of course there are member countries that will be much more affected than others, but the task is hard for the organization as a whole to rescue those prices.

Thanks friend for always sharing such interesting content with all of us. Successes.