Opec and oil market dynamics

Opec's goal of defending high oil prices may suit some members in the short run, but its long-term impacts could be damaging

Since its historic agreement in November 2016, Opec's efforts to manage the oil market have shown signs of success: key benchmarks are in backwardation, speculative positioning has been at record length and a floor price of $60 a barrel has been defended. Strong Opec compliance—both voluntarily (Saudi Arabia) and involuntarily (Venezuela)—has been supported by stronger-than-expected demand growth. By Opec's own measure of success, its target of reducing five-year commercial OECD inventories has been largely met (currently between 30-50m barrels above five-year average). As Opec meets in June to review its progress, it has already signalled its dissatisfaction with using the five-year average