The Organization of petroleum exporting countries-OPEC-is an intergovernmental body established in 1960 by its founding members, Saudi Arabia, Kuwait, Iran, Iraq and Venezuela.
Just watch or listen to the most recent news about the impact of raw material prices and the price of crude oil and you can feel good about OPEC being mentioned.
This is not surprising, when the organization represents countries which between them control approximately three quarters of global oil reserves. So when he speaks of a key member of this group, the world sits. Now you can subscribe to the free Commodity universe Ezine below and get the latest articles on the sector of raw materials. Only your name and email address. Is as easy as 1-2-3!
So what exactly are the objectives of this influential body?
OPEC aims to manage and provide strategic direction for oil prices, its Member States and thus:
In 2008, this body is composed of 12 Member States. These are the members present with their proven crude oil reserves indicated between square brackets, according to data from BP Statistical Review of World Energy 2007.
Saudi Arabia (264.2 billion barrels of crude oil), Iran (138.4), Kuwait (101.50), Iraq (115.00), Venezuela (87.0), Qatar (27.4), Libya (41.5), United Arab Emirates (97.8), Algeria (3), Nigeria (36.2), Angola (9.0), Ecuador (4.3)
Indonesia was a member until May 2008. Other countries may join namely, Syria, Sudan, Bolivia and Brazil.
Reserves of crude oil
According to OPEC share of world oil reserves was 77% (922 billion barrels) (2006) with 273bn which contributes non-OPEC barrels (23%).
The largest concentration is in the Middle East, where between them, Saudi Arabia, Iran and Iraq hold 56% of the total of OPEC (or 43% of the world's oil reserves).
A major challenge for these producers is to maintain their levels of production to meet growing global demand, especially from emerging Asian economies.
To this end there must be significantly higher investments in new capacity and refineries that can cope with the heavy sour crude, mostly produced by these producers.
Modern cars now use unleaded petrol, which is a derivative of sweet light crude, thus increasing production by only doesn't want to deal with this problem.
OPEC and crude oil Benchmark
While ICE Brent crude oil is considered the world reference point, since it is used for prices of about 65% of globally traded oil, the Organization has its own basket price of the benchmark.
The price of the basket is compiled daily by an average of 13 different degrees of crude based on its current membership.
These are: Saharan blend (Algeria), Girassol (Angola), East (Ecuador), Minas (Indonesia), heavy, light Iran Basra (Iraq) Kuwait export, Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine light Arabic (Saudi Arabia), Murban (UAE), BC17 (Venezuela).
Price differentials between the previous basket and crude NYMEX WTI light or ICE Brent crude is not significant.
For example, on Friday 27 June 2008, the basket was $ 135.31 per barrel, while ICE Brent crude in London was $ 141.98 and NYMEX WTI was $ 141.71, a prize for WTI and Brent approximately 5% above the basket.
Oil and the dollar
Global oil prices and sales are listed in US dollars and so inevitably the value of the dollar will have an impact on the revenues of OPEC members and oil on their decision on the amount of oil to produce.
Recent significant weakness of the dollar after the credit crisis has brought investors, hedge fund and commodity traders to seek refuge in crude oil, through exchange traded funds (ETF 's) or via oil futures contracts.
And many senior figures in the Member States have publicly expressed concerns about the impact that the activities of commodity trading speculators have on oil prices.
Some Member States, in particular, Iran and Venezuela, have started to shift from the dollar to pay in euros. With the strong euro against the dollar, is a tendency here might develop in the long term.
The way to go
The global economy faces higher raw material costs, as well as higher costs for energy, including the price of crude oil.
OPEC is well positioned to influence events going forward, given its control of a significant majority of global oil reserves.
Meeting the demand for oil consumers, mindful of the leading global climate change challenges, such as oil needs investment capacity, are likely to be the predominant problems in front of this great organization going forward.
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