OPEC meeting

Find out about the Organisation of the Petroleum Exporting Countries (OPEC) meeting and announcement – including why it’s important for traders and its effect on global oil prices.

What is the OPEC meeting?

The OPEC meeting is a twice-yearly session in which the organisation sets oil production quotas for each of its 15 member countries. These quotas are important because they affect the global supply of oil and, in turn, its price.

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How does the OPEC meeting affect traders?

OPEC’s members are estimated to control more than three-quarters of proven crude oil reserves,1 and supplied approximately 34% of the world’s oil in 2017.2 As a result, the production quotas set at OPEC meetings can have a strong impact on the global supply of oil and influence its price. The quotas set can also affect demand in other energy markets, including natural gas and heating oil.

This makes OPEC meetings important dates in some traders’ calendars.

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Natural Gas
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Heating Oil
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No Lead Gasoline
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London Gas Oil
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How does OPEC change the oil price?

OPEC aims to change the price of oil by adjusting supply volumes. If its members want to increase the price of oil, they can revise their production quotas downwards to limit supply. Alternatively, if they want to reduce the price of oil, they can raise their production quotas to increase supply. Assuming demand remains constant, the price of oil will move in the intended direction.

Other major producers also sometimes attend OPEC meetings as non-voting observers to coordinate production levels. For example, in January 2017, several non-members agreed to collude with OPEC to reduce oil production, with further cuts agreed in December 2018.

However, OPEC’s ability to regulate oil prices has subsided this decade due to shifts in global supply and demand. The US has increased domestic shale oil production in recent years, reducing demand for OPEC-produced oil. This has put downward pressure on global prices, even as Chinese consumption has rocketed. However, there have still been occasional short-term price spikes as a result of global crises (eg the Arab Spring in 2011), as uncertainty surrounding future supply drives surges in demand.

Traders may therefore wish to consider other economic data and news sources, in addition to the latest OPEC quotas, before speculating on oil prices.

Find out more on what affects oil prices.

Why do OPEC countries agree to oil quotas?

OPEC’s stated aims are to ‘coordinate and unify the petroleum policies of its member countries and ensure the stabilisation of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.’

While OPEC’s mission statement might sound noble, it is really a cartel. It acts to fix prices, maximise profits and limit competition between its members. It has often been accused of anti-competitive actions including profiteering by constricting supply, and deliberately creating oil surpluses in an attempt to drive down prices and bankrupt competitors (like US shale producers).

Politics is also sometimes involved. For example, in 1973, its members voted to restrict supply to target countries it felt were supporting Israel in the Yom Kippur War. Global prices went from $3 a barrel in October 1973 to $12 a barrel by March 1974.

However, OPEC meetings can end in stalemate if members are not able to unanimously agree new production volumes. Reaching a consensus is not easy as member countries will generally seek to maximise their own production levels, and limit other countries’, in order to benefit from the best possible prices and volumes. This problem is sometimes exacerbated by unrelated political tensions between nations. Friction between members can also arise if any country has exceeded the previously agreed quotas, as this can reduce the prices received by the group as a whole.

OPEC meeting format

Ordinary meetings are held twice a year, at the organisation’s headquarters in Vienna. Generally, these meetings are six months apart. Extraordinary meetings – meetings that occur outside of the biannual schedule – can also be arranged for matters that cannot wait until the organisation is next meant to meet.

Decisions are announced via press conference on the day of each meeting, with most decisions becoming effective 30 days later (except where another date is agreed or the decision is vetoed by a member before it is implemented).

OPEC also publishes monthly and annual oil market reports, as well as an annual world oil outlook report which assesses the long-term prospects for oil.

What happened in the last OPEC meeting?

At December’s meeting, the organisation agreed to cut global oil supply by 1.2 million barrels per day from January 2019. Of these, 800,000 are from OPEC countries, and 400,000 are to be cut by countries working with the group. For instance, Russia agreed to a reduction of 228,000 barrels per day, but this will be a staggered reduction rather than an overnight event.

This OPEC reduction was made to combat a global surplus, which saw the price of Brent and WTI fall between October and November 2018.

Which countries are members of OPEC?

When OPEC was founded in 1960, it had five founding members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Since then, the organisation has grown to include 15 member countries.

Each country is expected to send one or more delegates to each conference meeting, but there must be at least two-thirds in attendance for the meeting to obtain quorum. If a country’s delegation consists of more than one person, they must appoint a head of the delegation. This is usually the country’s oil or energy minister.

Each country has a single vote, and countries must vote unanimously before any change to policy can be implemented. Other countries may attend meetings as observers if permitted by the conference, but they do not get a vote.

Qatar has highlighted its intentions to leave OPEC in 2019, and emphasised that this decision is not political, but rather, reflects a desire to concentrate on liquified natural gas production. Currently, the Gulf state is the largest supplier of liquified natural gas in the world, but also supplies around 600,000 barrels of crude oil a day as a member of OPEC.

Country Date joined
Saudi Arabia 1960
Iran 1960
Iraq 1960
Venezuela 1960
Kuwait 1960
Qatar 1961
Libya 1962
United Arab Emirates 1967
Algeria 1969
Nigeria 1971
Ecuador 1973
Gabon 1975
Angola 2007
Equatorial Guinea 2017
Republic of the Congo 2018

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1 OPEC, 2018
2 OPEC, 2017

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