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The Role of OPEC

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Title: The Role of OPEC


1
The Role of OPEC in Oil Market
Stability presented by Mohammad
Alipour-Jeddi Head, Petroleum Market Analysis
Department Organization of Petroleum Exporting
Countries Vienna Economic Forum 5th November
2007 Vienna
2
  • Outline
  • Understanding OPEC
  • Review of the oil market
  • Historical developments
  • Recent developments
  • Prospects
  • OPEC capacity expansion
  • Concluding Remarks

3
  • Understanding OPEC

4

OPEC profile
  • Average GDP per capita 2,200
  • But there is a very wide range (550-45,960)
  • 95 of the 533 million people in OPEC live in a
    country where GDP per capita is no higher than
    5,000
  • This compares with OECD average GDP per capita of
    over 28,000
  • Average life expectancy 61 years
  • Oil Dependency of OPEC MCs
  • Share of oil exports in total exports 68
    (15-95)
  • Share of oil exports in GDP 27
    (5-59)

5
OPEC objectives
OPEC Statute (Article 2)
  • The principal aim of the Organization shall be
    the coordination and unification of the petroleum
    policies of Member Countries and the
    determination of the best means for safeguarding
    their interests, individually and collectively
  • The Organization shall devise ways and means of
    ensuring the stabilisation of prices in
    international oil markets, with a view to
    eliminating harmful and unnecessary fluctuations
  • Due regard shall be given at all times to the
    interests of the producing nations and to the
    necessity of securing a steady income to the
    producing countries an efficient, economic and
    regular supply of petroleum to consuming nations
    and a fair return on their capital to those
    investing in the petroleum industry

6
OPECs role in a globalised and interconnected
world
  • Engagement in dialogue with producers consumers
    The Conference
  • OPEC EU
  • OPEC IEA
  • OPEC China
  • Active role participation in international
    forums
  • IMF, World Bank, IRU,

7
OPEC-EU Energy Dialogue
  • Initialized in December 2004
  • Three Ministerial meetings since 2005
  • Workshop on the Impact of Financial Markets on
    the Price of Oil and Volatility (2006)
  • Roundtable on Oil Market Developments (2005)
    Energy Policies (2007)
  • Dialogue seeks to enhance co-operation in oil
    market analysis, energy policies, energy
    technologies and related multi-lateral issues

8
OPEC-IEA Dialogue
  • Dialogue seeks to enhance mutual understanding of
    views and issues important to consuming and
    producing countries
  • Five joint workshops have been held on key oil
    market issues since 2001
  • First three focused mainly on oil investment and
    supply issues
  • Most recent, Asian Oil Demand Outlook and
    Challenges, held in Bali

9
OPEC-China Dialogue
  • Initiated by Ministerial Meeting in Beijing in
    December 2005
  • First High-level OPEC-China Roundtable held in
    Vienna in 2006
  • Second High-level Roundtable held in Beijing in
    October
  • The Dialogue seeks to establish a continued
    exchange of views at all levels on energy issues
    of common interests, in particular security of
    supply and demand, within a balanced and
    pragmatic framework that will ensure a fruitful
    and long-lasting cooperation

10
  • Review of the oil market
  • Historical developments

11
Continued increase in world oil demand, but
structural shift in oil demand growth
12
OPEC production Maintaining market balance(mb/d)
13
Supply security Supply exceeding demand
14
  • Review of the oil market
  • Recent developments

15
Recent developments in crude oil prices (US/b)
16
OPEC Reference Basket value considerably lower in
euros than in US dollars
17
Factors behind upward shift in prices since 2004
  • Surge in demand due to strong world GDP growth at
    30-year high
  • Weak non-OPEC supply
  • Increasing OPEC production
  • Downstream bottlenecks
  • Geopolitical tensions and increased activity in
    futures markets magnifying price volatility

18
Strong World growth led by Asia
19
Sudden surge in oil demand growth in 2004
20
Weak non-OPEC supply growth(mb/d)
21
OPEC in action Crude production responsive to
market needs
22
Sharp increase in OPEC production led to lower
spare capacity
23
Tightness in downstreamIndustry faced with
shortage of effective spare refinery capacity
24
Investment by major oil companies (Billion US)
25
Increasing activities in futures market1,000
Contracts
26
The volume of paper trade for commercials
non-commercials have increased in the NYMEX
27
  • Prospects
  • OPEC capacity expansion

28
OPEC/non-OPEC share in oil reserves and
production ()
29
OPEC production capacity plans by countrymb/d
30
OPEC production capacity plansincluding NGLs
31
OPEC refining expansion planstb/d
32
Concluding remarks
  • OPEC reserve base is sufficient to meet projected
    world oil demand (oil 77, natural gas 49 of
    total world reserves)
  • OPEC Members are undertaking investments to
    expand supply capacity (more than 5 mb/d by 2012)
    to meet the expected increase in world oil demand
    and provide an adequate cushion of supply
  • Additional efforts are also being made to address
    tightness in downstream
  • Recent Ministerial decision to increase OPEC
    production by 0.5 mb/d is a clear demonstration
    of the Organizations concern about the continued
    health of the world economy as well as its
    ongoing commitment to ensure adequate supplies,
    especially ahead of the high-demand winter season

33
Concluding remarks
  • Security of demand is vital to ensuring that the
    appropriate level of investments are made in OPEC
    Member Countries to minimise the risks associated
    with under- and over-investment
  • Consumers governments should consider minimising
    policy-induced uncertainties on oil demand
  • OPEC attaches great importance to the need for
    deepening and widening the dialogue between
    producers and consumers for the benefit of both
  • The Third Summit of Heads of State and Government
    of OPEC Member Countries, to be held in Saudi
    Arabia in November 15-16, will provide long-term
    guidance to enhance OPECs stabilising role in
    the market and ensure adequate supplies to meet
    energy needs for sustainable development

34
www.opec.org
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