OPEC’s Ability to Tame Oil Prices Is Limited

OPEC’s ability to tame oil prices that hit a record high above $100 a barrel last week is curbed by limited unused production capacity, officials from the exporter group and analysts say.

The Organization of the Petroleum Exporting Countries says it holds around 3 million barrels per day of production in reserve. Since many members have expressed unease with record prices, that begs the question: why are they not raising output?


Since oil hit $100 for the first time last week, some OPEC ministers and officials have said most members are already pumping at full tilt, leaving little room for collective action.

“Because most members are currently producing at full capacity, it seems that even if there is a decision to increase the output ceiling, not all members would be able to,” Mohammad Ali Khatibi, deputy director of international affairs at the National Iranian Oil Company, said recently.

While OPEC says it could boost output by an additional 3 million bpd — enough to flood the 86 million bpd world market — other analysts say that figure is too high.

CNBC