The Organization of the Petroleum Exporting Countries (OPEC) may no longer wield the market-shaping power it once did over global oil prices.
This is the perspective shared by Patrick De Haan, Head of Petroleum Analysis at GasBuddy, during his appearance on CNBC’s Fast Money on Friday.
De Haan underscored the challenges facing the oil cartel, particularly in its ongoing struggle to sustain higher prices.
“OPEC’s relevance likely has been reduced. They are continuously fighting lower prices,” he remarked.
Citing recent market trends, De Haan pointed to West Texas Intermediate (WTI) crude oil prices, which have hovered around $70 per barrel, with little sign of surpassing that threshold.
“WTI today is about $70 per barrel and really struggling to get anything above that level,” he observed.
The expert also noted the uncertainties surrounding OPEC’s production strategies, referencing the possibility of an increase in output slated for April 2025. However, he suggested that this timeline might be pushed back further.
“It will not surprise someone if they continue to push that to July or potentially till the end of 2025,” De Haan said, highlighting the unpredictable nature of OPEC’s decisions amid fluctuating global energy dynamics.
Looking ahead, De Haan forecasted that the oil industry’s challenges would disproportionately affect different sectors. “I think next year will be more of a struggle for the upstream than it will be for the downstream,” he added, pointing to potential difficulties for exploration and production activities compared to refining and distribution.
Declining OPEC’s Influence and Growing Competition
- The shifting global energy landscape has eroded OPEC’s once-dominant position. The cartel, which historically influenced global oil markets through coordinated production cuts or increases, now faces headwinds from several fronts.
- The rise of alternative energy sources, increasing investments in renewable energy, and the emergence of non-OPEC producers such as the United States have curtailed OPEC’s control. The U.S., in particular, has seen significant growth in shale oil production, often undermining OPEC’s attempts to stabilize prices.
- De Haan’s comments align with a growing sentiment among industry analysts that OPEC’s strategies are becoming less effective in the face of a rapidly evolving market.
The cartel’s decisions, once capable of causing immediate ripples across the globe, are now often met with muted responses as market participants factor in diverse supply sources and technological advancements.
Earlier in the week, global energy market expert and founder of Vanda Insights, Vandana Hari echoed similar thoughts saying “I think that is where the market attention is focused because that’s the variable. With OPEC+, we’ve seen three postponements of the unwinding of the 2.2 million barrels per day. What that tells me is that OPEC+ despite all the talks in the market speculation is managing to remain cohesive.”
She noted further, “I think that is the most they can do or the least they can do in their view. They really don’t have the bandwidth to prop prices much higher,” she stated.
