LONDON (Reuters) - The Organization of the Petroleum Exporting Countries was set up in 1960 to coordinate oil production policy among its members but in recent decades it has increasingly cooperated with producers outside the group to manage the market.
This month, OPEC’s latest deal on oil supply cuts with Russia and other non-OPEC nations collapsed, sending the oil price into a tailspin.
Below are key periods when OPEC has faced tumbling oil prices:
OPEC curbed output in the early 1980s to support oil prices, with Saudi Arabia carrying the biggest burden of cuts. But prices, which were above $30 a barrel in 1980, still slid amid rising production from outside OPEC, such as the North Sea and Alaska, and as some OPEC states exceeded their quotas.
Frustrated at losing market share and seeking to punish overproducers within OPEC, Saudi Arabia ramped up production, initially driving oil prices below $10 in 1986.
Prices recovered slowly from the lows, partly by forcing oil majors with higher costs than OPEC to delay production projects. But Ahmed Zaki Yamani, the Saudi oil minister who had championed the drive for market share, was fired in 1986 by the kingdom’s ruling family who wanted to target higher prices, not higher volumes.
OPEC hiked output in 1997 at the behest of Saudi Arabia’s then oil minister, Ali Naimi, who said the increase was needed to meet rising demand from China. But the Asian financial crisis and OPEC overproduction led to a collapse in oil prices to about $9 a barrel by 1999 as demand crumbled.
OPEC announced three output cuts between April 1998 and April 1999, withdrawing 4.3 million barrels per day (bpd) of oil. The cuts were accompanied by a Saudi ultimatum delivered to Venezuela and other OPEC producers to stop producing more than their quota.
In addition to OPEC’s cuts, the Vienna-based group also helped oil prices rally by securing promises of cuts by several non-OPEC producers, including Mexico, Norway, Oman and Russia.
The global financial crisis gave the market one of its biggest oil price shocks as crude, which had roared to an all-time high of $147 in July, plummeted to $36 by December.
Between September and December, OPEC held three meetings where the group agreed to withhold a combined 4.2 million bpd from the market.
Booming U.S. shale production had been grabbing market share from OPEC since 2012. But, even as prices began to fall, Saudi Arabia kept the taps on to avoid losing further ground. Oil prices tumbled to almost $27 in 2016 from above $115 in 2014.
Facing strains on their budgets, Saudi Arabia and Russia collaborated to create an informal alliance of OPEC and other producers, dubbed OPEC+. The group agreed its first cuts in 2016 and by January 2020 the cuts totalled 2.1 million bpd, with Saudi Arabia again making the deepest reductions.
Naimi, the Saudi minister behind the volume policy in 2014, was replaced in May 2016 before OPEC+ forged a deal on cuts.
The coronavirus outbreak in China and its rapid spread took its toll on the global economy, driving down demand for oil in the first weeks of 2020.
In response, Saudi Arabia and other OPEC states called for OPEC+ to make additional cuts to reduce supply by a total of 3.6 million bpd — insisting on non-OPEC agreement. When Russia rejected the plan, OPEC scrapped all output limits.
By March 9, shortly after OPEC+ talks collapsed in Vienna, oil had fallen to as low as $31 from about $66 at the end of 2019 as Riyadh said it would lift production to record highs.
Writing by Edmund Blair; editing by Jason Neely