Once the global oil market emerges from the coronavirus crisis, it may be greeted by a surprising change: greater dependence on crude from OPEC. For the time being, the Organization of Petroleum Exporting Countries and its allies are relinquishing their share of the market in a bid to prop up crude prices, slashing millions of barrels of output as the pandemic crushes fuel demand.
Yet the current upheaval could give OPEC another chance. As the oil-price collapse chokes off investment in new supplies around the world, from the mega-projects of Big Oil to drilling by U.S. shale wildcatters, some analysts see the cartel reviving its battered standing.
“From the point of view of oil-market share, OPEC will be a clear winner in the coming years,” said Michele Della Vigna, head of energy industry research at Goldman Sachs Group Inc. “Under-investment in the rest of the industry ultimately plays to their favor.”
OPEC Revival?
Group could recoup market share as industry downturn hits rivals
Sources: IEA, Goldman Sachs, Bloomberg calculations
It’s a message that the organization should still treat with caution. Warnings abounded during the last decade that the plunge in investment which followed the 2014 oil-market crash would leave a supply gap for OPEC to fill. But the shortage never materialized as American shale proved surprisingly resilient.
Instead, the 60-year-old organization — led by Saudi Arabia and other Middle East exporters — found itself in late 2016 forming an alliance with erstwhile rivals, such as Russia, to curtail production. Last week this 23-nation network, known as OPEC+, reaffirmed it will keep output capped all the way through to 2022. The group’s monitoring committee meets again on June 18 for another review of the market.