OPEC's Battle For Market Share Is Not Going Well
According to EIA data, US oil and petroleum product imports from OPEC have dropped to a 28-year nadir. The US production boom has catapulted the country towards energy independence, while simultaneously rendering its dependence on OPEC imports lower than any time since April 1987. Last year, the US surpassed Saudi Arabia to become the world's largest oil producer. It has largely been the oversupply yielded by this boom that has caused oil prices to drop ~60% since last June.
And then last November, all eyes turned to Vienna, where OPEC convened for its annual meeting. Would it adjust its output quota to address the price plunge? The answer was a definitive "no," and prices accelerated in their downward trajectory. As OPEC's Gulf states remain entrenched in their market share protection strategy, the export revenue data show that the 12-member group is losing the battle. It also crystallizes the rationale for OPEC's insistence for maintaining this strategy: "We are not going to cut if non-OPEC members don't cut. Why should we? We need to protect our market share."
On June 5, all eyes will once again turn to Vienna when OPEC convenes for its next meeting. Early in March, in the first public comment regarding the upcoming meeting, Kuwait's OPEC governor, Nawal Al-Fuzaia, said that the group will likely decide to maintain its 30 M/bpd production quota. Asked if she thought OPEC would continue pursuing its current market share-oriented strategy at that meeting, she said, "I think so because there is less than two months, removing weekend and summer time, before the next OPEC meeting...I don't think there would be a big change in the oil market supply/demand in this time."
The EIA estimates that last year OPEC members (excluding Iran) earned approximately $730 billion in net oil export revenues. This represents an 11% drop from the $824 billion earned in 2013, largely due to the fall in oil prices, and to a lesser degree the decreases in the amount of OPEC net oil exports. OPEC's 2014 export revenues represent the lowest earnings for the group since 2010.
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Saudi Arabia earned the largest share of these earnings, $246 billion last year, which represents about 1/3 of total OPEC oil revenues, the EIA report said. Iran data are not included because of the challenges associated with estimating Iran's earnings- including the Islamic Republic's inability to receive payments (due to Western sanctions) and possible price discounts it offers its existing customers.
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For 2015, the EIA forecasts that OPEC net oil export revenues (again, excluding Iran) could drop further to approximately $380 billion as a consequence of the lower annual oil prices projected in 2015. Additionally, the agency forecasts that the group's annual output and exports as a whole will remain steady with last year's levels due to its decision to retain its output quote at last November's annual meeting in Vienna.
For 2016, OPEC revenues are projected to rebound to $515 billion with the forecast rebound in crude oil prices.
AI
