Magazine article Economic Review

OPEC and Non-OPEC Countries - (FACT SHEET)

Magazine article Economic Review

OPEC and Non-OPEC Countries - (FACT SHEET)

Article excerpt

OPEC Countries

The 11 countries, which make up the Organization of Petroleum Exporting Countries (OPEC), produce about 40 per cent of the world's oil and hold more than 77 per cent the world's crude oil reserves. OPEC also contains most of the world excess oil production capacity.

OPEC was set-up to help unify and coordinate members petroleum policies and to safeguard their interests. Among other activities, OPEC holds regular meetings of National Oil Ministers to discuss prices and since the early 1980s, to set production quotas. OPEC also provides financial assistance to developing countries through its OPEC Fund for International Development (founded in 1976), and conducts research on such topics as energy, finance, technology and relevant economic issues.

According to EIA, the 11 current OPEC members accounted for 39.7% of total world oil supply (including crude oil, natural gas liquids, refinery etc.) in 1999. OPEC's share of world oil supply had remained constant between 1993 and 1996 (at about 39.5%) as non-OPEC oil supply had increased dramatically especially in the North Sea, Latin America and West Africa. However, OPEC oil production increased by about 1.6 million barrels per day (b/d) in 1997 and another 0.5 million barrels per day in 1998, out of total global oil supply growth of nearly 3.2 million barrels per day between 1996 and 1998, thus increasing its share of the world's oil supply by more than 1 percentage. However, following the most recent pledge to cut production, OPEC's share declined in 1999, but is expected to increase over the latter half of 2000 as OPEC production is expected to rise throughout 2000.

OPEC Pricing

OPEC maintain a "basket" of seven crude's (Algeria's Saharan Blend, Indonesia's Minas, Nigeria's Bonny Light, Saudi Arabia's Arabian Light, Dubai, Venezuela's Tia Juana and Mexico's Isthmus) which it uses for pricing purposes.

In February 2000, the OPEC basket price averaged $26.84 per barrels, up $2.26 from the January 2000 average price, and $16.88 per barrels more than the price in February 1999 ($9.96 per barrel). The average OPEC basket price for the fourth quarter of 1999 averaged $23.42 per barrel, up $3.41 from the average third quarter price, While the average OPEC basket price for the year 1999 was $17.47 per barrel, up $5.19 per barrel above the average OPEC basket price in 1998.

Recent Developments

On March 27, The Organization of Petroleum Exporting Countries (OPEC) will hold a Ministerial Meeting where they will decide if an increase in the crude oil production targets is necessary, and if so, by how much. Regardless of what OPEC decides at this meeting, EIA's current forecast for OPEC 10 (excluding Iraq) crude oil production assumes an increased of 1.0 millions barrels per day in the second quarter above first quarter productions level. The forecast then assumed another 0.1 million barrels per day increase in OPEC 10 Crude oil production in the third quarter and an additional 0.4 million barrels per day increase in the fourth quarter of 2000. Continued increases are expected through out 2001. If, for instance, the OPEC 10 countries were to agree to a 1.2 million barrels per day increase in their quotas, and an actual production increase of 1 million barrels per day, as assumed in our forecast, would put OPEC 10 compliance with pledged production cuts at 74% in the second quarter. This is just about the same compliance level that has been seen over the previous twelve months of their agreement.

In addition to our base case forecast in this month's Short-term energy Outlook, EIA has looked at the price impact for various levels of OPEC increases in production. Several scenarios are described briefly below. The world oil prices refer to West Texas intermediate crude oil. To get to the OPEC basket price mentioned in the rest of this document, subtract about $2 per barrel from the prices stated below. …

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