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Does OPEC still have the power that it used to?
Has OPEC lost its authority over the oil market? If so, who or what is now the dominant player?
In October 2018, the price of oil started to fall. What does this mean for the future of the crude oil market and can it be likened to the 2008 financial crash?
Spencer Welch: It is unusual, and it is hard to compare it with any one particular period in the past. There are a number of factors, almost like a perfect storm which has hit the oil market. At the end of September and up to the third of October, the price was at $86 and rising. There were those within the bull market that were saying it was just a matter of time before $100 was hit.
The global economy was looking good, the demand was growing, US production had stalled, and the US appeared to be going after Iran very aggressively by cutting their exports down to zero. Then literally in a matter of weeks or less, all of those factors changed – the US had issued waivers, the global economy has had a few concerns and US production is back up.
Malcolm Graham-Wood: Not everyone went for $100, although I was perhaps a lot more bearish than most. There were plenty of people out there going for $100 for all the reasons Spencer just talked about. The first week in November was the real interesting point, because that was the weekend that the sanctions on Iran were due to come in. But well before that, in what is traditionally the tightest quarter of the year, the Russians and the Saudis had jacked up production.
We now know that the Saudis, who had been producing 10 million barrels a day for export, were actually producing over 11 million and the Russians had gone up to 11.4 or 11.5 million. So, when the waivers came in and were bigger than expected, the market came down.
Spencer Welch: When OPEC met in June, they released the constraints that they had self-imposed. So, Russia and Saudi were almost doing what they had been encouraged, or what they had agreed amongst themselves, to do.
Watch the full video for more on oil
- Is OPEC plus still relevant?
- What is a fair price for oil?
- How much influence is Donald Trump having over the decisions made about oil?
- How important is the G20 meeting for oil markets?
If you’d like to find out more about these topics and more, watch the full oil #IGCommodityChat video.