Opec 'circle of friends' to shrink International oil price control?

Opec 'circle of friends' to shrink International oil price control?

Angola recently said that due to disagreements over production quotas, it will withdraw from Opec on January 1, 2024. Although Angola's oil production is small in Opec, the news of its withdrawal triggered a slight decline in Brent crude futures prices. Opec was founded in the 1960s to break the price monopoly formed by the "seven sisters of oil". But as Opec has grown, it has become more concerned about its influence on international oil prices. For many years, Opec has been through the control of production quotas to achieve the purpose of affecting international oil prices, but due to the unequal strength of member states and different economic conditions, this unified production reduction policy differences are more and more, the number of Opec's "circle of friends" can be found that there are as many as 4 member countries out of the circle.

The history of Opec's "circle of friends"

OPEC, short for the Organisation of the Petroleum Exporting Countries, dates back to 1960 and was founded by five oil-rich countries: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Within 15 years of its establishment, Qatar, Indonesia, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, and Gabon had joined, forming a vast organization of more than a dozen resource countries in the Middle East, Africa, and South America.

In the Western media, Opec is often referred to as a cartel, meaning an organization that restricts competition by controlling prices, limiting production, or otherwise. Opec has resisted such characterization, given the potential for antitrust lawsuits. Gabon withdrew in 1995 but rejoined in 2016. Indonesia withdrew in November 2016; Qatar withdrew in January 2019; Ecuador's withdrawal in January 2020; The most recent country to leave is Angola.

The original intention of Opec was to break the price monopoly formed by seven integrated multinational oil companies (commonly known as the "Seven Sisters of Oil", including: Anglo-Iranian Oil Company, also known as bp, Gulf Oil Company, Shell, Standard Oil Company of California, Standard Oil Company of New Jersey [Esso], Standard Oil Company of New York [Mobil] and Texaco). At that time, the "Seven Sisters of Oil" negotiated taxes and royalties to be paid with resource countries in exchange for oil exploration rights in those countries, based on a unilaterally set and published oil price. In order to achieve higher profits, these companies kept pushing down prices, and Opec was born. In the first decade of its existence, Opec devoted much of its energy to negotiating oil prices with the "seven sisters of oil." But Opec's ultimate goal was to take pricing power into its own hands, and it did so in the early 1970s.

With the passage of time, Opec gradually formed a stable organizational structure, gradually transitioning from the initial price negotiation orientation to the control of oil production, and gradually began to play an increasingly important role in the pricing power of the international oil market.

Opec + : Opec's "circle widening"

At the end of 2016, in order to further increase its influence on the market, adjust crude oil production, stabilize international oil prices, and protect the economic gains of oil-producing countries, Opec reached a cooperation agreement with 11 non-OPEC oil-producing countries, forming the loose Opec + alliance. The 11 new membRod Oil Production Systemers are Russia, Kazakhstan, Azerbaijan, Oman, Mexico, Bahrain, Brunei, Equatorial Guinea, Malaysia, South Sudan and Sudan, with the inclusion of the first five countries being particularly significant.

1. Russia

Russia is the largest member of Opec + in terms of proven oil reserves and GDP size. According to bp2021's Statistical report on World Energy, Russia has proven oil reserves of 107.8 billion barrels. In 2021, Russia will produce 10.78 million barrels of crude oil per day. Russia is classified as an "upper-middle income" economy by the World Bank. Data from the U.S. Energy Information Administration (EIA) also shows that Russia is the third largest producer of oil and refined products after the United States and Saudi Arabia. Russia's economy is not monolithic: in 2021, Russia's non-resource non-energy exports set a record of $193 billion, up 37 percent from 2020.

2. Kazakhstan

Kazakhstan ranks 12th in the world in terms of oil reserves, with proven oil reserves of 30 billion barrels, accounting for 1.7% of the world's oil reserves. Kazakhstan will produce 1.87 million barrels of crude oil per day in 2021. Through structural reforms, coupled with strong domestic demand, foreign direct investment, and large oil reserves, Kazakhstan's GDP has grown significantly, and it is classified as an "upper-middle income" country by the World Bank. Tengiz and Karachaganak are the two largest oil fields in Kazakhstan, producing almost half of the country's total output.

3. Azerbaijan

Azerbaijan has 7 billion barrels of proven oil reserves, equivalent to 0.4 percent of global oil reserves. Azerbaijan will produce 720,000 barrels of oil per day in 2021. Azerbaijan signed its first oil contract with an international company in 1994, achieved a sharp drop in poverty rates with an annual economic growth rate of 10% between 1996 and 2005, and oil and gas production and exports are the core of Azerbaijan's economy. Azerbaijan is classified as an "upper middle income" country by the World Bank.

4. Mexico

Mexico is Latin America's second-largest economy, with 6.1 billion barrels of proven oil reserves. Mexico will produce 1.92 million barrels of oil per day in 2021, and oil is an important part of the country's economy, with more than 55 percent of government revenue coming from the oil industry. Over the past 30 years, Mexico's GDP growth has underperformed compared to other countries. Between 1980 and 2018, Mexico's economic growth averaged slightly more than 2% a year. The country's economy is currently recovering from the downturn it experienced in 2020 due to lower oil prices and the pandemic. Mexico's GDP in 2022 is $1.32 trillion and is expected to reach $1.65 trillion by 2027. According to the World Bank, Mexico is an "upper-middle income" economy. The country has close trade ties with the United States, which is the largest source of foreign direct investment in the country. The new United States-Mexico-Canada Agreement (USMCA) entered into force on July 1, 2020.

5. Oman

Oman's economy, which has traditionally been based on fishing, agriculture and trade, has come to depend on the oil industry since oil and gas discoveries were made, and 68% to 85% of government revenue comes from oil. Oman has 5.4 billion barrels of proven oil reserves and will produce 980,000 barrels per day in 2021. The sharp fall in oil prices since 2014 has weighed on government finances, widening the gap between government revenue and spending and further contributing to large annual deficits. In order to reduce the vulnerability of the economy to external shocks, Oman is developing a development plan focusing on economic diversification, industrialization and privatization. At present, Oman's oil is mainly exported to Asia. China alone accounted for 86 percent of its crude oil exports, with India in second place at 6.2 percent, followed by South Korea and Japan, the data showed. Oman is classified as a "high income" economy by the World Bank.

6. Other countries

The other six non-OPEC members of Opec + are Bahrain, Brunei, Equatorial Guinea, South Sudan, Sudan and Malaysia, which together have 8.9 billion barrels of proven oil reserves.

SVES Oilfield Supply Co., Ltd is a leading oilfield service company in the oil and gas industry, providing high-quality products and services for various artificial lift methods. One of its main products is the rod oil production system, which is widely used to lift formation fluids from low-debit wells.

A rod oil production system consists of four main components: a prime mover, a surface pump, a sucker rod string and a downhole pump. The prime mover, usually an internal combustion engine or an electric motor, provides power to the surface pump, which converts the rotational motion into a reciprocating vertical motion. The surface pump is connected to the downhole pump by the sucker rod string, which is lifted and lowered within the production tubing of a cased well. The downhole pump captures and lifts the formation fluids up the tubing and through a pumping tee that directs the fluid into a flowline.

SVES Oilfield Supply Co., Ltd offers various types and sizes of rod oil production systems to meet different well conditions and customer requirements. The company also provides technical support, installation, maintenance and optimization services for its products. SVES Oilfield Supply Co., Ltd has a strong reputation for its quality, reliability and efficiency in the oil and gas industry.

However, the rod oil production system is not only affected by the well parameters and the system design, but also by the global oil market and the price fluctuations. One of the major factors that influence the oil price is the Organization of the Petroleum Exporting Countries Plus (OPEC+), which is a coalition of 13 OPEC members and 10 of the world’s major non-OPEC oil-exporting nations. OPEC+ controls about 40% of global oil supplies and more than 80% of proven oil reserves, and aims to regulate the supply of oil to set the price on the world market.

OPEC+ affects the price of oil by coordinating supply cuts when the price is deemed too low and supply increases when its members believe prices are too high. The decisions of OPEC+ can have significant impacts on the profitability and sustainability of the rod oil production system, as well as the demand and supply of the oilfield service industry. Therefore, SVES Oilfield Supply Co., Ltd needs to monitor the oil market trends and the actions of OPEC+ closely, and adjust its production and operation strategies accordingly.

SVES Oilfield Supply Co., Ltd is committed to providing the best rod oil production system and service for its customers, and to adapting to the changing oil market environment. The company strives to achieve excellence in the oil and gas industry, and to contribute to the global energy security and development.