For several decades, OPEC’s semi-annual meetings in Vienna were central to strategic decisions in the oil market. However, this tradition has given way to virtual discussions, a change initially driven by the pandemic but now firmly entrenched.
Centralization in Riyadh’s Favor
The shift to virtual meetings reflects a consolidation of influence by Saudi Arabia and its strategic ally, Russia. Led by Energy Minister Prince Abdulaziz bin Salman, Saudi Arabia now dominates the discussions. Many observers believe this centralization benefits the two largest producers at the expense of countries with lower production capacities.
An OPEC+ member indicated that this change aims to avoid leaks and control external communication. However, it limits direct interactions among delegations, reinforcing the sense of marginalization among smaller members.
Impact on Transparency and Governance
Historically, in-person meetings offered a certain level of transparency. Informal exchanges and impromptu statements provided insights into internal dynamics. Now, these interactions are disappearing, making decision-making processes more opaque.
According to Bhushan Bahree, senior analyst for Commodity Insights, this shift could weaken OPEC+’s credibility as an arbiter of oil markets. The absence of in-person meetings also complicates the resolution of internal disputes, as illustrated by Angola’s departure following tensions over its quotas.
Challenges Ahead for OPEC+
Despite these structural changes, OPEC+ faces pressing issues. Oil prices, below $80 since August, struggle to recover despite efforts to limit supply. Members like Gabon and Kazakhstan, which frequently exceed their quotas, add complexity to maintaining internal cohesion.
The online meeting scheduled for December 5 must address several key questions: extending voluntary production cuts, ensuring compliance, and strengthening the group’s credibility amid a market anticipating an oversupply in the first quarter of 2024.
Efficiency with a Trade-off
While virtual meetings enable faster and more cost-effective decision-making, they also increase the risk of excessive control by major producers. This centralization could weaken smaller OPEC+ members and undermine the perception of fairness within the group.
As technological advancements facilitate these changes, the growing reliance on this format could compromise OPEC+’s ability to act collectively during periods of volatility.
