Recently, OPEC’s share of the global oil market has plunged to 30%, the lowest in years.
It is after results of supply limit and involuntary losses in Iran and Venezuela.
Meanwhile, there is still a little sign, yet producers are uncertain on their output-cut strategy.
In July 2019, crude oil from the Organization of the Petroleum Exporting Countries that is made up of 30% of world oil supply was down.
According to OPEC data, it has dropped from the previous 34% a decade ago and a peak of 35% in 2012.
Despite OPEC-led supply cuts, oil has dropped from April’s 2019 peak above $75 a barrel to $60.
Prices were pressured by the slowing economic activity amid worries about the U.S.-China trade conflicts and Brexit.
If the fall in prices persists, the erosion of market share could raise the question of whether continued supply limitation is serving producers the best interests.
OPEC and its allies have a contract to limit supply until March 2020.
The group tried to guard its market share under the previous Saudi oil minister, Ali al Naimi.
He is the one which sharply decreased the volume of production in a pump war campaign in 2014.
Naimi was eager to win the battle. He argued that OPEC’s output was the world’s cheapest and would let the group surpass other producers like the United States.
As a result of his plan, OPEC’s market share grew.
Meanwhile, oil prices crashed under $30 a barrel. It was prompting many bankruptcies of U.S. petroleum products firm and stretching the Saudi budget.
Riyadh and OPEC were enforced to return to output cuts in 2017.
It is to support prices and sources within OPEC say there is no sign of any disposition to return to a pump war now.
Next Year’s Plan on Balancing the Market
On August 8, a Saudi official said, “Saudi Arabia is committed to doing whatever it takes to keep the market balanced next year.”
He also added, “We believe, based on close communication with key OPEC+ countries, that they will do the same.”
Since January 1, 2017, OPEC and ally Russia with other producers have been restraining supply for most of the period.
The alliance, known as OPEC+, in July renewed the deal until March 2020.
OPEC’s market share has collapsed steeply in the last two years while helping to bolster prices.
The world supply has developed by 2.7% to 98.7 million barrels per day, but OPEC crude output has declined 8.4% to 29.6 million bpd.
According to data from news reports, OPEC’s exports are also dwindling on the percentage of world shipments.
In recent months, Iran has led the decrease.
Nonetheless, Swedish bank SEB indicated that for now OPEC+ still has room to perform. It was after countries made most of the voluntary curbs.
Countries that still pump at a relatively high rate are Russia, Saudi Arabia, Kuwait, UAE, and Iraq.
Venezuela and Iran are under the U.S. authorizations. They are also being forced to curb shipments and deliver the bulk of the cuts.
Venezuelan supply was already in long-term waning before Washington tightened sanctions this year.