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OPEC's Capacity
Context
The Organization of Petroleum Exporting Countries (OPEC) possesses sufficient spare oil capacity to offset a complete loss of Iranian oil supply, should Israel take action against Iranian facilities. However, the dynamics change dramatically if Iran retaliates by targeting oil installations in Gulf nations.
About OPEC+
- The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960by Iraq, Iran, Kuwait, Saudi Arabia, and Venezuela. The organization has since expanded to 13 members.
- OPEC+ is an expanded version of OPEC that includes OPEC member countries and additional oil-producing nations, primarily those not in OPEC (Russia, Mexico, Kazakhstan, and Oman)
- In 2016, largely in response to dramatically falling oil prices driven by significant increases in U.S. shale oil output, OPEC signed an agreementwith 10 other oil-producing countries to create what is now known as OPEC+.
- Among these 10 countries was the world’s third-largest oil producer in 2022, Russia, which produced 13% of the world total (10.3 million barrels per day [b/d]).
- The current members of OPEC are: Saudi Arabia, United Arab Emirates, Kuwait, Iraq, Iran, Algeria, Libya, Nigeria, Congo, Equatorial Guinea, Gabon and Venezuela.
- Non-OPEC countries in the global alliance of OPEC+ are represented by Russia, Azerbaijan, Kazakhstan, Bahrain, Brunei, Malaysia, Mexico, Oman, South Sudan and Sudan.
OPEC's Spare Capacity
- OPEC+ has enough spare capacity to mitigate the shock of losing Iranian production.
- OPEC+ has cut production by a total of 5.86 million bpd to support oil prices amid sluggish global demand.
- Estimates indicate that Saudi Arabia could increase its output by 3 million bpd, while the United Arab Emirates has the potential to raise production by 1.4 million bpd.
- Despite OPEC's ability to compensate for Iranian losses, much of the spare capacity is concentrated in the Middle East Gulf, making it vulnerable to conflict escalation.
- The available spare capacity could be significantly reduced if attacks on energy infrastructure occur in the region. In such scenarios, the West may need to rely on strategic reserves to stabilize supply.
- Iran’s capacity: Iran, a significant OPEC member, produces approximately 3.2 million barrels per day (bpd), accounting for about 3% of global oil output.
- Despite U.S. sanctions, Iranian oil exports have surged to nearly 1.7 million bpd, primarily driven by demand from Chinese refiners, which disregard unilateral U.S. sanctions.
Fact Box: India’s Oil Landscape
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