Episode 21: Has OPEC+ lost relevance

Summary:

In this episode we discuss the potential decline of OPEC+ and its influence on the global oil market. We highlight the Saudi Arabian government's recent decision to unilaterally adjust production levels, questioning the OPEC+’s authority. We discuss the emergence of major oil discoveries outside of OPEC+ controlled regions, such as with American shale and in Guyana and Namibia, as a factor contributing to the group's diminishing control over global production. We ultimately suggest that while OPEC+ remains relevant, its influence and prestige have waned in the current volatile oil market.

Questions to consider as you read/listen:

1. What are the key factors contributing to OPEC+'s potential decline in relevance?
2. How might the discovery of new oil reserves impact the future of OPEC+?
3. What are the potential economic and geopolitical ramifications of OPEC+'s decline?

Long format:

Has OPEC+ lost relevance?

Saudi Arabia’s announcement on October 18, 2024 to unilaterally switch to punitive production without OPEC+’s blessing is a possibility. It’s also on a scale, right? How much are they going to produce over and beyond what they are doing now? How much pain will they endure to inflict pain, right?

Right now it’s talk. MBS and the Prince are usually pretty good at follow through historically.

One of my main take aways is that OPEC+ really is losing international relevance and prestige and may even totally fall apart, in my opinion.

When you have major major discoveries outside of their zone of influence, not just talking American shale, but let’s not forget Guyana Stabroek Block, including the Liza, Payara, Snoek, Turbot, Ranger, and Hammerhead discoveries and major discoveries are located in deepwater regions, including off the coast of Namibia, and Brazil.

They no longer control production.

I’m not saying OPEC+ isn’t relevant but it certainly has lost some relevancy I would think.

It’s a volatile market. The base case for me is frequently neither of the extremes not $500 oil or $20 oil.