What is OPEC?

In the past week I have mentioned OPEC a lot on my social media posts. I have been getting messages from individuals who are keen to understand more about  OPEC . I then decided to put up this blog post hoping to simplify it for anyone who is interested to know. As currency traders, it benefits us to understand the markets.

What does OPEC stand for?

OPEC stands for Organization of the Petroleum Exporting Countries. This organization comprises of 14 nations and it was founded in 1960. There are some other countries which are non OPEC members  (Canada is one of them). It’s Head Quarters are in Vienna where they usually hold their conferences/meetings.

What is their mission?

• To unify the petroleum policies of it’s member countries
• To stabilize oil markets
• To regulate the supply to consumers by ensuring that there are no oil shortages.

Why does OPEC hold conferences/meetings?

They do so to discuss the oil production output. They meet up to discuss among other things the barrels of oil that they want to produce per day. The latest OPEC meeting which was the 174th meeting, was held in Vienna on the 22nd of June. Congo was also approved with immediate effect as a member of OPEC. They also mentioned that the oil market has improved over the past 6 months. They came into an agreement to increase crude oil production by 1 million B/D (barrels per day) on paper. The markets didn’t really think it was enough though. The markets thought it was oversold. The oil ministers also acknowledged that not all members will be in a position to increase the barrel production right away. It might be a bit difficult for Iran since it was hit by the U.S sanctions that has hindered it’s energy exports. In actual fact, the increase will be around 600 000 B/D.

What actually happens when they pump more barrels of oil per day?

Major oil producers decide to pump more oil to prevent shortages in supply. The president of the United States Of America, Donald Trump has been publicly expressing his support for more output in his recent tweets and he definitely welcomed the deal to pump more barrels.

How does increasing the oil output affect the oil price?

Producing more barrels of oil helps in reducing the price. In short, increased oil production=less oil price and decreased oil production= higher oil price. If OPEC can decide to decrease the oil production, definitely the oil price will rise higher. With the higher Crude oil price comes a higher fuel price, higher food prices and a lot more. I hope I have managed to at least break it down in a more simpler way like I always try. Thank you for stopping by. Kindly share this post using the share buttons below.