In recent times, the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, held a dominant position, accounting for 60% of the global trade in crude oil. However, with strategic cuts in oil production aimed at bolstering crude prices, OPEC’s once unassailable global influence is undergoing a noticeable decline.
The International Energy Agency (IEA) reported this week that the global market share of OPEC+, an alliance comprising select OPEC members and Russia-led non-OPEC oil producers, has dwindled to just over 50%, marking its lowest point since 2016. While a significant portion of this decline can be attributed to OPEC+’s own decisions this year, largely driven by Saudi Arabia’s production cuts, the situation is more intricate than it appears.
As OPEC takes a step back, the IEA not only underscores the influx of additional U.S. crude barrels into the market but also points to substantial production increases in Brazil and Guyana. Furthermore, OPEC member Iran has seen its production reach a five-year high, benefiting from its exemption from the organization’s quota restrictions.
While Guyana experiences a remarkable surge in production, tripling to 385,000 barrels per day (bpd), the focus in the physical crude market intensifies on developments in the U.S. and Brazil. Brazil’s output has risen by 400,000 bpd to 3.6 million bpd, while the U.S. maintains a consistent production level of around 20 million bpd. Despite concerns about a potential economic slowdown and a high-interest rate environment, the IEA anticipates a U.S. supply increase of 1.4 million bpd.
Nevertheless, the Paris-based think-tank predicts a slowdown in non-OPEC+ supply growth “in 2024.” Regardless of this forecast, the desperate efforts by OPEC+ to shore up oil prices—currently down by 20% since October (as of 15:13 EST on December 15, 2023)—have inadvertently provided support to rivals in a challenging market.
While it would be premature to assert that OPEC’s influence is diminishing, the organization proudly notes that 79.5% of the world’s proven oil reserves are situated in OPEC member countries, primarily in the Middle East, constituting 67.2% of the organization’s total reserves.
Yet, in an industry characterized by cyclical dynamics, recent trading years demonstrate the adeptness of non-OPEC producers in seizing market share during both favorable and challenging times. It seems highly probable that 2024 will follow this trend, especially with projections indicating that crude oil supply is poised to outpace demand.