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The Oil Powerhouses Replacing OPEC

Three countries currently account for close to 40 percent of global production and only one of these countries is the Organization of Petroleum Exporting Countries. The three are Russia, the United States and Saudi Arabia and as their clout over oil markets are rising with rising production rates, OPEC's is set to decline, at least temporarily.

Reuters' John Kemp noted in a recent column on the topic that the so-called troika now called the shots more than ever before: all three countries produced North of 11 million bpd a day in October, a record high and more than the combined production of the rest of OPEC. According to OPEC, the OPEC's share of 30 percent of the OPEC's share in the OPEC's share of 40 percent this year

Each of the three producers have its own oil production policy that is relatively independent of other producers. True, Saudi Arabia and Russia have been playing on the same team for the last two years to a large extent because the game strategy is mutually beneficial. Yet we have seen abundant indications that moment of the two to start to diverge each other and pursue its own priorities. The U.S. in the same time has become the single largest swing factor outside the OPEC + club with a relentlessly rising production that could push it to the top spot next year.

This production will only continue to rise if OPEC now decides to cut production again, and will continue to push up the U.S. 'importance on the global oil market. So, does this all mean OPEC is as good as dead? For the time being, mostly yes. Most of its members, as Kemp notes, fall in one or more of the following categories: "is struggling under sanctions, mismanagement and unrest; is too small to matter; is maximizing production rather than participant in output controls; or simply aligns its output policies with those of Saudi Arabia. " Related: $ 50 Oil Puts Shale To The Test

The future remains uncertain, however. Most respectable forecasters like the Energy Information Administration and the International Energy Agency are upbeat about the growth of oil demand, but the upbeat forecasts come with conditions: the IEA recently said in its World Energy Outlook that producers will need to invest up new conventional production is essential to respond to this demand. Failing that, the U.S. would have to increase its shale oil production by as much as 10 million bpd in the seven years to 2025, which is a bold target, to say the least.

OPEC members are clear candidates for some of this production growth. Despite the fact that Iraq and Libya, some of the members, such as Iraq and Libya, are on track to grow their production. True, this growth will likely be nowhere near near a million bpd that U.S. The producers have added in last year, but it could be substantial in the case of Iraq, if the political and price conditions allow it.

What's more, Venezuela and Iran are unlikely to spend the rest of eternity under sanctions. There is a possibility, however, remote at the moment, that these two could have some point reverse in production they are experiencing now. Iran has demonstrated it could ramp up pretty quickly if given the chance. In other words, OPEC's clout on oil markets may be waning but it may be too early to bury the cartel for good just yet.

By Irina Slav for

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