00:00opec is a group of 12 countries that right now control around one-third of global crude production
00:07in 2016 opec was enlarged on a total of 23 countries form what now it's called the opec
00:15plus alliance which controls as likely over 50 percent of global crude production now the main
00:22purpose of opec is to stabilize oil markets oil markets by definition are prompted to a lot of
00:29volatility instability and geopolitical risk now the main job of opec is trying to stabilize those
00:36two cycles in oil markets by moving supply from one period to another opec was formed in the 1960s
00:45and back then most of the production was controlled by seven big companies oil companies called the
00:51seven sisters and um officers from saudi arabia from iran from iraq from venezuela met in in baghdad
01:01and decided to form this alliance to try to take control back of domestic production and have a say
01:07on international oil related matters the power of opec is to move supply from one period to another
01:16to to reduce the volatility you know in markets and try to balance the market now historically
01:22opec has has done that there has been some periods that have been extremely challenging let's think
01:27about kovi when oil demand dropped by 20 million barrels per day and back then opec did precisely that
01:34try to manage the market by reducing supply by 10 million barrels per day and stabilizing the market
01:41some other examples like for example when shale production was rapidly increasing opec decided to
01:48start cutting production to support prices so these are historical examples that show how opec and opec plus
01:55lately has managed to manage the market moving supply from one period to another i think this is a very
02:02important development for opec and it really puts um a question mark on the future of opec and opec plus
02:09as a cohesive organization uh the fact that uae a very important uh member of the organization which
02:17has a lot of spare capacity um around one one third of spare capacity of the organization even a bit
02:25more
02:25uh is held by by the uae really means that uh this could be um detrimental for for the cohesion
02:34of the
02:34of the group and the important question now is what is saudi arabia going to do it really puts the
02:40focus back into saudi arabia saudi arabia has been the central banker of the oil markets now what is
02:46saudi arabia going to do in this in this new scenario are they going to remain um the de facto
02:53leader of
02:53opec are they going to manage the market or is it going to be a free-for-all market given
02:58that's uh that
02:59the uae has has left that is the big question at the moment i think it really goes back to
03:03the to
03:04the incentives of being part of a cartel uh getting here it will tell you that when uh you are
03:09operating
03:10inside a cartel in a growing market there's more incentives for you to be part of that cartel
03:15however if you're part of a cartel that operates in a shrinking market then the incentives to remain
03:21in the group uh are less and less and and one can think that uh oil demand is going to
03:27pick up soon
03:28um nobody really knows uh but at some point oil demand is going to pick up and start decreasing so
03:34the incentives for those members that have capacity is to monetize their resources as fast as possible
03:41so it's really a first mover advantage who moves first we know that the incentives are there it's more
03:49about who moves first and right now it seems like the uae has has taken that step i think the
03:55impact
03:55on the oil markets in the short term would be quite limited because of the straight-up form was being
04:00closed um any additional supply coming from the uae is quite restrictive at the moment now they put an
04:06element this in the medium and long term once the straight-up form was reopens now what it means is
04:12that uh the uae will most likely increase production rush to increase production use all its all of
04:19its spare capacity at the moment their spare capacity is close to 5 million barrels per day
04:24before the war they were producing at 3.5 million barrels per day so that means that they have
04:291.5 million barrels per day of spare capacity on paper one would anticipate that once the straight-up
04:35form was reopened they will start pumping um as much as they can to reach that those 5 million
04:41barrels per day so in reality what it means is that more supply to the market um in the in
04:46the medium
04:47term i mean i think at the moment what we're seeing in the middle east is a is a very
04:51important um you
04:52know geopolitical um developments um i think we see two clear um clearly differentiated groups on the one
05:00hand we have saudi arabia pakistan egypt and turkey which are you know enforcing themselves as as the
05:07energy of the security leaders in the in the region and on the other hand as you correctly mentioned you
05:13have the uae which is um which close links with india israel and the and the and the us and
05:20and i
05:20think that what this really means for oil markets is that we're likely to see much more production from
05:26the uae coming forward and that would mean lower oil prices in the medium in the medium and long term
05:32by definition by nature oil markets are quite cyclical uh you have periods of high oil prices and higher
05:40oil prices normally kill a little bit of demand and then you go into a downturn which lower oil prices
05:45and lower oil prices in reality what it does it it tends to support additional demand and then after
05:52lower price you have another cycle of high oil prices that's the nature of oil of oil markets now
05:57what opec tries to do with their production policies is try to limit that volatility in you know
06:03markets by moving supply from one period to another so essentially what for for final consumers what it
06:09means is that they they will see and they have seen less volatility in oil markets um than uh we
06:17would
06:17have seen without opec taking an active role in managing the market we're now entering a period where
06:23oil demand starts growing less and less and at some point starts peaking and decreasing then game theory
06:29will tell you that cohesion is is at risk within within opec and opec plus now the important element here
06:36is
06:36that we know that oil demand is going to peak sometime soon um and at some point in the 30s
06:42or in the
06:4240s depending on the forecast that you look uh oil demand will start decreasing rapidly as we electrify
06:48transportation and and we increase our efficiency now the important consideration there is is there a
06:54role for opec or opec plus in a world where oil demand is rapidly um decreasing
07:00you
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