Title: The Role of OPEC
1The 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 4OPEC 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)
5OPEC 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
6OPECs 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,
7OPEC-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
8OPEC-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
9OPEC-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
11Continued increase in world oil demand, but
structural shift in oil demand growth
12OPEC production Maintaining market balance(mb/d)
13Supply security Supply exceeding demand
14- Review of the oil market
- Recent developments
15Recent developments in crude oil prices (US/b)
16OPEC Reference Basket value considerably lower in
euros than in US dollars
17Factors 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
18Strong World growth led by Asia
19Sudden surge in oil demand growth in 2004
20Weak non-OPEC supply growth(mb/d)
21OPEC in action Crude production responsive to
market needs
22Sharp increase in OPEC production led to lower
spare capacity
23Tightness in downstreamIndustry faced with
shortage of effective spare refinery capacity
24Investment by major oil companies (Billion US)
25Increasing activities in futures market1,000
Contracts
26The volume of paper trade for commercials
non-commercials have increased in the NYMEX
27- Prospects
- OPEC capacity expansion
28OPEC/non-OPEC share in oil reserves and
production ()
29OPEC production capacity plans by countrymb/d
30OPEC production capacity plansincluding NGLs
31OPEC refining expansion planstb/d
32Concluding 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
33Concluding 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
34www.opec.org
Thank you