OPEC supplies and their impact on crude oil futures prices
The Organization of Petroleum Exporting Countries (OPEC) is a driving entity of crude market fundamentals. Of the 12 countries that make up OPEC’s members, eight fall into the top 15 global leaders in production, with Saudi Arabia leading the world in oil production. On the other side of the crude market, Iran and Saudi Arabia are the only two OPEC countries that make the top 15 list of leaders in global consumption. They are 15th and 13th, respectively. Lots of production and limited consumption is the equation for ample levels of exports. Ten of the top fifteen global leaders in exports are OPEC member nations. These 12 nations are extremely important for supply on the global crude market. OPEC countries account for 41% of the world’s oil supply, but their global market share is often a point of apprehension for the nations who rely on the production.
A significant issue regarding U.S. energy policy is derived from the prior mentioned issue. The majority of U.S. petroleum consumption is imported from the world crude market. It’s a problem economically as petroleum imports are the largest portion of the U.S. trade deficit. This transfer of funds may create global imbalances on Forex markets and may be a bearish dollar fundamental. The other concern relating to oil imports has to do with where we get the oil from. For the most part, OPEC countries aren’t exactly best friends with the U.S. In fact, shear spite of Western nations and their international policies was a large reason OPEC was formed in the first place. If an international conflict was to arise, or there was a supply disruption of a less controversial nature, the U.S. could be faced with a critical problem. Approximately 2/3 of the U.S.’ domestic consumption of oil and oil based products comes from imports. In 2007, the U.S. imported 4,916 million barrels of oil. 44% of those imports, or 2,183 million barrels, came from OPEC member nations. On a percentage basis, U.S. imports from OPEC countries was in line with the rest of the OECD—****what does this stand for? nations; the U.S. just happens to import a whole lot more oil.
Considering that nearly half of the world’s imported petroleum comes from OPEC nations; they may have a significant influence over the crude market. Typically they define a price range and base production numbers on keeping prices where they would like. This price range will often move around, especially in recent times. OPEC’s ability to try to control the crude market is less prevalent than it once was, and questions regarding the accuracy of their production capabilities have come to be questioned. Their market influence may be smaller, but as long as the world imports OPEC oil in large quantities they will be able to possibly put pressure on petroleum prices.
(EIA: International: Petroleum: Production: Total Oil Supply [Includes Crude Oil, Natural Gas Plant Liquids, Other Liquids, and Refinery Processing Gain] All Countries, Most Recent Annual Estimates, 1980-2007)
(EIA: International: Petroleum: Imports and Exports: Total Net Petroleum Imports into Individual OECD Countries and Total OECD Most Recent 15 years)
(EIA: Home: Petroleum: Navigator: U.S. Imports By Country of Origin)
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