OPEC Turns 60 At ‘Critical Moment’ For Virus-hit Oil

OPEC faces a critical moment in its 60-year history
with the coronavirus crushing crude demand and prices, discord
among its members, and threats from a world seeking cleaner
fuels.

Founded on September 14, 1960, by Iraq, Iran, Kuwait, Saudi
Arabia and Venezuela who sought to control crude oil output, OPEC
currently comprises 13 members including nations from Africa and
Latin America.

The 60th anniversary “comes at a critical moment in its
history”, UniCredit analyst Edoardo Campanella said in reference to
the Organization of the Petroleum Exporting Countries.

“Its ability to steer the oil market in its favour has never
been put in question to the extent it is now,” he noted.

– ‘Relevant role’ –

The Vienna-based institution convenes for regular meetings to
assess the state of supply and demand in the marketplace, and its
pronouncements can still spark major price swings.

That ability has dimmed in recent years however, prompting it to
join forces with ten non-OPEC producers including Russia to curb
their collective output.

OPEC+ essentially wanted to counter surging energy supplies from
shale rock in the United States and help clear a stubborn supply
glut on world markets.

Today, OPEC pumps about one third of global oil — but OPEC+
accounts for almost 50 percent, giving it greater clout.

Carlo Alberto de Casa, trader at Activtrades, insisted that the
cartel retains a “relevant” function in the market, dismissing talk
the organisation was a “has-been”.

“They are slightly less influential compared to the past, also
due to production of non-OPEC countries and new extraction
techniques. But I still see a role for OPEC,” he told AFP.

This despite the larger OPEC+ in March failing to agree on a new
strategy — with Russia refusing cartel kingpin Saudi Arabia’s
request to cut their collective output and combat a virus-fuelled
slump in crude demand.

In response, top global exporter Saudi slashed its prices and
raised output to preserve market share in the face of Russian
opposition.

The Saudi-Russian price war, in tandem with the worsening
Covid-19 pandemic, sent oil prices off a cliff — and even caused
New York’s light sweet crude contract to briefly turn negative in
April — meaning producers paid buyers to take the oil off their
hands.

After the unprecedented market crash, OPEC+ in May slashed up to
a fifth of its output — a move that triggered a sharp rebound in
crude prices to current levels around $40 per barrel.

Added to the supply backdrop, the United States, now the world’s
biggest oil producer, curbed the pace of costly shale
extraction.

Rystad Energy analyst Paola Rodriguez-Masiu, while noting that
OPEC has lost market share in recent years, said the cartel still
has an important role to play because it possesses the largest
amount of accessible crude.

This meant that extracting its oil resulted in fewer carbon
emissions, she said.

“I would argue that OPEC would become more and more important”
in the future, she concluded.

AFP

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