The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have a strong desire to maintain high and stable oil prices. This group, which collectively produces 40% of the world’s crude oil, plays a significant role in shaping the global energy market. Despite their efforts, oil prices have not reached the desired heights in recent times. Even with significant geopolitical events such as the death of Iran’s president and the escalating conflict in Gaza, the price of Brent crude, the global benchmark for oil, has hovered around $82 a barrel since the beginning of May.
One of the main challenges facing OPEC in its quest to boost oil prices is the lack of adherence to production targets by its member countries. In March, OPEC and Russia agreed to extend production cuts, aiming for a reduction of 2.2 million barrels per day (b/d) until the end of June. This cut was in addition to the 3.7 million b/d reduction that had been previously agreed upon for 2024. However, despite these efforts, the cartel is currently producing above the agreed-upon limits. In fact, the daily output in 2024 is not significantly different from the last quarter of 2023. This overproduction is likely to create tensions within the group as members gather for OPEC’s ministerial meeting on June 2nd to discuss their strategy.
The failure of OPEC members to adhere to their output targets is not a new issue. This lack of compliance has been a recurring challenge within the organization, undermining its ability to effectively manage global oil prices. In the past, disagreements over production levels have led to internal conflicts and strained relationships among member countries. The current situation, with overproduction exceeding agreed limits, is likely to exacerbate these existing tensions and could make it harder for OPEC to reach consensus on future production decisions.
In addition to internal challenges, OPEC also faces external pressures that impact its ability to control oil prices. The global energy market is influenced by a range of factors, including geopolitical events, economic trends, and technological advancements. These external forces can create volatility in oil prices, making it difficult for OPEC to predict and stabilize market conditions. The recent death of Iran’s president and the ongoing conflict in Gaza are just two examples of events that have the potential to disrupt global oil markets and impact prices.
Looking ahead, OPEC will need to address both internal and external challenges in order to achieve its goal of maintaining high and stable oil prices. This will require greater cooperation and coordination among member countries, as well as a deeper understanding of the complex and interconnected factors that influence the global energy market. By successfully navigating these challenges, OPEC can position itself as a key player in shaping the future of the oil industry and ensuring global energy security.
