Effect of Non-OPEC Members on Oil Price

Crude oil is a key player in the global commodity market because the volatility of oil prices has a great impact on the global economy. This makes global oil-producing and exporting countries and groups wield a great influence on the global economy.

Oil prices are determined mainly by geopolitical affairs and economic events. Examples of geopolitical events are the Iraq-Iran war of 1980, they are both large-scale producers of oil. Significant events of such and some natural occurrences like the coronavirus impact the oil prices.

OPEC and Oil Price

OPEC is an intergovernmental organization of petroleum exporting countries, they consist of 13 member countries. They formulate policies and oversee the affairs of their member countries. Opec provides about 40% of the world’s crude oil, and they also are in charge of about 60% of the exported crude oil traded on the international market. The magnitude of OPEC market shares in the oil trading sector, their actions have a huge impact on the international level of oil prices. History has shown that, when OPEC production targets are reduced, oil prices increased. This is generally to the advantage of oil traders using the oil profit app for their transactions.

Non-OPEC Members and Oil Price

Non-Opec members are oil-producing and exporting countries outside the OPEC, they are not concerned with the policies of OPEC, they can make their own decisions and implements their policies, without receiving any backlash from OPEC. They represent about 60% of the world’s crude oil production which has America as one of its major influencers. They have a high consumption level, which limits their portability. The non-OPEC members are referred to as price takers and not price influencers. That is why they make policies in response to these price changes and prevent any further influence to prices by managing productions. For this reason, non-OPEC producers produce at full or near full capacity and have little or no spare capacity.

In OPEC, oil production is mostly handled by National Oil Companies (NOCs), while International or Investor-owned oil companies (IOCs) perform most of the non-OPEC members’ oil production. IOCs objective is to increase shareholder’s stock and make investment decisions based on economic events, NOCs operate similarly as IOCs but with additional objectives of providing social amenities, employment infrastructure, and revenues that impact the standard of living and economy of their country. Non-OPEC members investment, policies, and supply capabilities are flexible, they change according to market conditions

OPEC’s Influence

OPEC+ a group of the original 14 OPEC members and 10 more oil-producing countries with Saudi Arabia as the overall largest producer and a member of OPEC and Russia second producer and not a member of OPEC. In combination, they control over 50% of global oil supplies and they are a major influencer, they have this upper hand because of the volatility of oil prices.

They have the economic capability to improve or interrupt the supply of oil globally to certain levels at any given time, which impacts the prices of oil in a great way. For instance, the sudden increase in the oil supply of Saudi Arabia in March 2020 leads to a major decline in the price of oil.

Conclusion

Non-OPEC MEMBERS like China and America, even though with their large number of production, can not affect price with an increase or decrease in their supply due to their high consumption rate, however in some situations where they manage to force OPEC to increase their supplies, the price will be affected

OPEC+ on the other hand can impact the price of oil globally by enhancing supply or reducing it, if Russia and Saudi Arabia should decide to ramp up their supplies as an OPEC+ member, the price of oil will be globally affected. OPEC as it stands still plays a major in countering every non-member action to regulate price.

In the end, the market has the final say on the price of oil.