OPEC: Does It Really Matter Anymore?


Hi all. This is my first post for Energy Source and like Melissa says, we hope this blog to be informative and fun. So, here I go.

Questions, questions. I've been hearing a lot of questions about OPEC lately. In fact, OPEC talk has been all-consuming for the past week as oil prices have slid from over $99 a barrel to a six-week low under $89. But the bigger question many analysts and traders are asking is does OPEC really matter?

Another question is this: To pump more oil or not to pump? That's not really the issue when the Saudis already admit to producing over 9 million barrels a day--above their November target. Alaron Trading's Phil Flynn is right when he asks whether OPEC will decide to legitimize what they're already overproducing by raising output quotas to their current production level.

But considering oil prices have risen 20% in the past 3 months--and remember OPEC decided at its September meeting to boost production by 500,000 barrels a day--even if they raise output, will it really have an impact on prices?

Now that prices are more than $10 off their highs, it seems less likely. But there are also much more pressing issues effecting prices--a slowing U.S. economy and the impact on energy demand, easing geopolitical tensions (now that Venezuela's Chavez may NOT be president for life and Iran, at least according to the latest U.S. intelligence report, probably isn't pushing ahead on a nuclear weapons program).

The answer to all these questions, for some folks, may be simply to wait. Some traders are deciding they've made enough money in the oil market this year to take a break, sit on the sidelines, and wait for 2008.

Questions? Comments? energysource@cnbc.com