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OPEC's power coming to an end
Published on 08.12.2016 16:48

The oil price remains stable today above the $50 level but things may change in the foreseeable future as the world’s leading oil cartel influence wanes.

Analysts cite the US, as the main reason OPEC has lost its power to influence markets and they also predict that the situation will get worse as time goes on,

“OPEC was at its most powerful when the United States, the world’s largest oil consumer, relied on OPEC member states to meet its oil needs. Since the US shale boom increased US energy independence, OPEC can no longer threaten supply as it did during the 1970s. Now it simply risks squeezing itself out of the market “noted Mark Andrich, Director of Sustainability from theUniversity of Western Australia and Jemma Green Research Fellow from Curtin university.

Even now as a cut in production from OPEC and non OPEC members including Russia is underway, some are already predicting that the deal will bring other players into the market attracted by the higher oil prices which will ultimately drive the price down,

"This is a short-duration cut, targeting excess inventories and not high oil prices, which would instead unleash a sharp production response both in the U.S. and in the rest of the world," U.S. investment bank Goldman Sachs said in a note.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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