In the medium term, the kingdom’s strategy of restricting output to prop up prices is unsustainable; it is conceding too much market share to shale and other non-Opec producersOpec’s logo inside the cartel’s headquarters in Vienna, Austria. Picture: REUTERS/LEONHARD FOEGERshare of the global oil market is progressively eroding as it attempts to keep prices artificially high by restricting its own production.
The cartel’s members progressively increased their market share between 2002 and 2008, but since then, their share has been on a downward trend, which shows no sign of reversing. Opec’s combined production was up by just 2-million barrels per day in 2018 compared with 2008, while non-Opec output climbed by 9.6-million bpd in the same period.
Saudi Arabia’s share of global output has remained stable since the 1990s, but many of the organisation’s other members have seen their share erode as a result of war, sanctions, unrest and mismanagement.Saudi Arabia emerged as the undisputed leader of Opec in the 1990s after war and sanctions crippled production in rivals Iran and Iraq, and corruption, mismanagement and unrest hit output from Nigeria, Libya and Venezuela.
But the limits of this strategy are now becoming evident with prices struggling to rise even as Iran and Venezuela have been pushed almost entirely out of the market. In 2018, Saudi Arabia continued to restrict output during the first six months, and ultimately raised production by just 400,000 bpd for the full year, compared with a US increase of 2.2-million bpd, according to BP.
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