Wars, sanctions, recessions and technological advances are some of the many challenges that OPEC has weathered since 1960, when five developing countries joined forces to coordinate the marketing of their precious oil resources. Saudi Arabia, Venezuela, Iran, Iraq and Kuwait overcame their political differences to establish one of the world’s most influential economic cooperatives, a rebellious act against global oil majors that laid the foundation of the modern petroleum market.

‘The founding of OPEC was a triumph of cooperation, dialogue and compromise, steeped in the iron will of the founders to assert their sovereign rights to exploit their natural resources for their national development and to help promote market stability,’ said OPEC Secretary General Haitham Al Ghais in a recent statement marking the group’s 65th anniversary.

Since then, they have been joined by Algeria, Congo, Equatorial Guinea, Gabon, Libya, Nigeria and the United Arab Emirates (UAE), which are all still members today. Qatar, Indonesia, Ecuador and Angola have over the years joined and left the organisation.

OPEC cohesion threat
Maintaining unity among such a diverse group of countries has been one of OPEC’s greatest challenges since the start, but arguably even more so today as members’ economic interests are more intertwined with geopolitics than ever.

‘Maintaining internal cohesion will likely remain an uphill battle. Balancing self-interest with collective goals is challenging, especially when restraining production for long periods on a voluntary basis,’ says Vandana Hari, Founder and CEO of oil market analysis provider Vanda Insights. In response to the 2016 oil price crash, OPEC signed an unprecedented cooperation agreement with 10 non-OPEC oil producing countries in a bid to tackle deepening oversupply exacerbated by the boom in US shale oil production. This marked the start of OPEC+, the group’s output coordination with other large oil producers such as Russia that is still heavily influencing the crude oil market today.

Eight members of the OPEC+ group – Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman – are currently unwinding some of the oil output restrictions they have voluntarily been following in order not to further weigh down crude oil prices. The restrictions, which have been ongoing since 2022, have meant that those countries participating have not been reaping the full revenue benefits of their oil infrastructure. In a sign that OPEC expects an oversupply in early 2026, the group announced earlier this month that it would pause the planned production increases in the first quarter.

This is the core of OPEC’s constant balancing act between, on the one hand, pumping out enough crude to support member countries’ economies and managing their market share and, on the other hand, carefully handling output in order not to depress oil prices.

OPEC’s role is intrinsically linked to Saudi Arabia’s ability to adjust its sizeable oil production according to how OPEC assesses the crude market’s supply and demand balance.

‘OPEC+ has a great impact on oil markets. The fact that one of its members, Saudi Arabia, is the one and only swing producer, means that it has the opportunity to affect markets based on their actions to cut or increase production,’ comments Hans van Cleef, Head of Energy Research at consultancy EqoLibrium.

Over the decades, the Group’s coordinated reactions to oil price movements have significantly dampened the global effect of oil price shocks. During the price surge in early 2012, for example, oil prices could have hit a high above $160/b had OPEC not acted to restrain output, analysis from the Oxford Institute for Energy Studies (OIES) shows.

‘Historical evidence shows that OPEC’s spare capacity has had a smoothing effect on global oil price movements, with prices under the counterfactual scenario exhibiting much sharper cycles both on the upside and the downside,’ say study leads Bassam Fattouh and Andreas Economou, respectively Director and Head of Oil Research at the OIES.

Shale oil threat
While OPEC’s role has historically been entrenched in it reacting quickly and effectively to supply issues in the oil market in order to stabilise prices, its actions have over the past decade been more and more influenced by the sharp rise in US oil production.

Since 2008, US field production of crude oil has more than doubled and continues to rise, according to the US government’s Energy Information Administration (EIA), presenting a threat to OPEC’s market share and its decades-long way of working. Earlier this month, the EIA slightly increased its output forecast for 2025 and 2026, but short-term production levels are expected to plateau.

The creation of OPEC+ was the Group’s main response to the rise of US production, a move that some analysts see as having reinforced oil cartel’s influence.

‘The alliance’s collective decisions shape balances more than any single member could. Given its control over nearly 40% of global supply, OPEC+ policy remains a key determinant of market outcomes. The group can often restore market balance faster than waiting for price signals alone,’ comments Vanda Insights’ Hari.

At the same time, OPEC+ has given substantially more influence to non-core OPEC members, notably Russia, which remains one of the globe’s biggest oil producers. Russian fossil fuel revenues have been significantly impacted by international sanctions following its full-scale invasion of Ukraine in 2022. Its OPEC+ membership allows Russia to continue playing an important role in the global oil market despite its restricted domestic situation. ‘The biggest winner is Russia, which represents the non-OPEC members within OPEC+. Russia has benefitted from having a say in OPEC+ policy,’ says van Cleef.

Demand outlook threat
Since the ratification of the Paris Agreement to limit greenhouse gas emissions in 2016, analysts have been forecasting an imminent peak moment for oil demand. Governments across the globe have adapted policies to reduce, and ideally phase out, carbon emissions from energy systems, industrial processes and transport.

For OPEC, the shift to clean energy has meant a serious threat to its future revenue streams and market influence.

‘There has been a paradigm shift in the way OPEC behaves today compared to how it behaved, let’s say, in the 80s, when there was no option other than expecting that things will run only on oil and gas,’ notes global energy commodity strategist Abhishek Deshpande.

Faced with this threat, OPEC members have started to diversify their sources of income, which have in the past largely consisted of oil money. Saudi Arabia, for example, has been deploying solar power at one of the fastest rates across the globe, with more than 10 GW of solar PV capacity now connected to help meet its 50% renewable electricity target by 2030.

‘They [OPEC] know they are in a new paradigm shift. It’s not same old, but they have recently definitely gotten more leeway to decide how they want to proceed,’ Deshpande says.

While forecasts were at first expecting a quick pathway to net zero economies, the energy transition towards a renewables-based electricity system has slowed down in recent years on the back of cost and implementation concerns.

Current forecasts for oil demand therefore vary, with OPEC itself seeing demand rise to 123mn b/d by 2050, compared with an increase to 114mn b/d forecast by the International Energy Agency (IEA) under a business-as-usual scenario and even a fall from current levels forecast by oil major BP to 83mn b/d.

What is clear is that, even with diversification underway, OPEC members remain highly dependent on oil revenues to keep their national economies running. ‘The future trajectory of oil revenue remains critical to the Saudi budget outcome even as non-oil revenue grows. Lower oil revenue (…) will result in a larger fiscal deficit or the scaling back of government spending, particularly on investment projects, given the difficulty of reducing outlays on wages and social benefits,’ says Tim Callen, Visiting Fellow at the Arab Gulf States Institute, in a recent analysis report.

OPEC influence on crude prices
In the short term, OPEC’s standing in the energy world is unwaveringly important because its decisions on supply restrictions and increases deeply impact the global oil supply and demand balance that determines crude prices which in turn are intrinsically linked to global GDP.

Its cohesion, especially within the enlarged OPEC+ group, will continue to be tested in the coming months as some of its members, such as Iran and Venezuela, may be able to unwind their oil supply restrictions tied to domestic conflicts.

‘The role of OPEC will remain important, especially as long as the Saudis have this swing producer role. Depending on their position, OPEC or OPEC+ will remain an important party to watch as it will still be able to affect oil supply, and thus oil prices, significantly in the future,’ says EqoLibrium’s van Cleef.

• Further reading: ‘Peak uncertainty – what the current debate about peak oil demand says about the energy transition’. Several recent reports suggest that global oil demand either has peaked, or will peak, before 2030. On the other hand, oil supplier group OPEC+ vigorously rebuts these forecasts. Despite radically diverging visions, both sides do seem to agree about the fields of the coming battle: in emerging economies and between addition versus substitution. New Energy World Senior Editor Will Dalrymple investigates. 
• Trump vs US LNG? Discover more about the contradictory state of oil and gas diplomacy today.