OPEC
The Organization of the Petroleum Exporting Countries — a cartel of major oil producers that coordinates production levels to influence global crude prices.
OPEC was founded in 1960 and currently includes 12 member countries including Saudi Arabia, Iraq, Iran, UAE, and Venezuela. Its expanded grouping, OPEC+, adds major non-member producers led by Russia.
OPEC meetings — typically twice yearly — set production quotas for member states. Announced cuts tend to spike oil prices; announced increases or quota cheating pressures prices lower. Saudi Arabia, as the largest producer, acts as the effective swing producer, sometimes unilaterally adjusting output to defend a price floor.
OPEC's market power has diminished with the rise of US shale production, which is responsive to price and can quickly add or pull back supply outside OPEC control.
Example
OPEC+ announces a voluntary cut of 1.66 million barrels per day in April 2023, surprising markets. Brent crude jumps $5/bbl (6%) on the day of the announcement as traders reprice supply expectations for the next quarter.
Related Terms
Brent Crude
The global benchmark crude oil grade produced from the North Sea, priced in $/barrel and the reference for roughly two-thirds of the world's oil trade.
BeginnerEnergy Complex
The collective term for energy-related commodities — crude oil, natural gas, refined products (gasoline, heating oil, diesel) — and the markets and instruments around them.
BeginnerSupply and Demand Balance
The net difference between commodity production and consumption in a given period — a surplus weakens prices; a deficit strengthens them.
IntermediateWTI Crude
West Texas Intermediate crude oil — the US benchmark grade traded on NYMEX, priced in $/barrel and settled at Cushing, Oklahoma.
Beginner