The Fall of OPEC

Olav Dirkmaat of Mises.org reveals how it happened that the once-powerful OPEN has become a shell of its former self.  Their inability to control the price of oil is demonstratd in the market everey day.  Here’s how it happened:

from https://mises.org/blog/how-opec-became-irrelevant
Olav Dirkmaat
The large traditional oil-producing countries — both OPEC and non-OPEC — are still catching up with the new reality. After deciding to extend the production cuts — agreed upon half a year ago — for another nine months, oil prices plunged below $50/barrel. Not quite the effect these oil giants were hoping for, but nothing out of the ordinary. After all, the fact is that supply and demand dynamics in the oil market have changed for good, something you can read in more detail in UFM Market Trends’ latest report on crude oil.

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What happened after the first production cut that began in January this year?

The OPEC countries — and a few non-OPEC countries such as Russia — agreed late November 2016 to lower oil output by 1.3 million barrels a day (b/d), from 33.8 million b/d to 32.5 million b/d. Oil prices went from approximately $45/barrel to over $50/barrel. Suddenly, marginal US shale oil became profitable to extract. This is how US shale producers reacted to the OPEC supply cut:

 

How OPEC Became Irrelevant

The large traditional oil-producing countries — both OPEC and non-OPEC — are still catching up with the new reality. After deciding to extend the production cuts — agreed upon half a year ago — for another nine months, oil prices plunged below $50/barrel.

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About Paul Gordon 1367 Articles

Paul Gordon is the publisher and editor of iState.TV. He has published and edited newspapers, poetry magazines and online weekly magazines.
He is the director of Social Cognito, an SEO/Web Marketing Company. You can reach Paul at pg@istate.tv

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