OPEC’s Influence on the Global Market Weakens with Increased Production

Posted in Top Headlines by on February 2, 2018

For many people who trade oil or invest in the commodity, OPEC is one organization they follow closely. The reason why is simple. OPEC, which stands for Organization of the Petroleum Exporting Countries, has a direct influence on the supply of oil from some of the world’s biggest crude oil producers.

OPEC meets monthly to review issues such as how well balanced the current levels of supply and demand are. When prices begin to drop due to too much supply, OPEC member nations, including Qatar, Saudi Arabia, Venezuela, Iran, Iraq and the United Arab Emirates, agree to reduce production. This, in turn, helps keep oil prices at a level that benefits member states, without damaging global productivity by lowering available crude oil too drastically.

Increased Domestic Production Undermines OPEC’s Trade Goals

Since 2014, the supply of crude oil around the world has been high enough to drive prices relatively low. OPEC responded to this issue by reducing production in its member states. However, an increase in domestic production to levels not seen since the 1970s may offset OPEC’s efforts to decrease global crude oil supply.

Oil prices almost always fluctuate, but announcements by OPEC have, in the past, pushed trading prices up or down accordingly. Now, with increased output from the United States, their influence is more limited than it was during periods of lower domestic production.

Despite the uptick in crude oil prices, however, oil traders have seen a strong price in recent weeks. Even with an end of the week downturn on February 2, 2018, price per barrel remains stronger than it has been in some time. Chances are good that OPEC member states may increase production if these higher prices per barrel stay steady in the near term.

Changes in Supply and Demand Impact Crude Oil Futures

For those who trade oil online via a Forex platform, these potential changes in oil supply could be signs of future market trends. Closely monitoring levels of production, pricing forecasts and the domestic and international markets can help those who trade oil futures make better decisions about when to buy, sell or hold on to their oil futures. Every time the market fluctuates, investors have a chance to turn a profit with a smart trading decision.

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