OPEC

An intergovernmental organisation whose members hold a large share of the world's proven oil reserves and coordinate their output. Decisions take the form of production targets allocated among members, announced after scheduled ministerial meetings, and a wider arrangement adds several non member producers to the same framework. The instrument is supply: the group can add barrels to the market or withhold them, and it has no direct instrument on demand at all.

The distance between an announcement and a barrel is where most of the reading happens. A target is not production, compliance with a target varies by member and is measured after the fact by external agencies, and spare capacity, the output a producer could bring on quickly, decides whether a target is a constraint or a description of what was going to happen anyway. An announced cut from a group already producing below its target changes nothing physical.

Its influence is bounded by the rest of the market. Producers outside the arrangement respond to price with their own investment decisions, and an oil benchmark prices a specific grade at a specific delivery point rather than the group's aggregate output, so the effect of a decision reaches different benchmarks unevenly. Underneath everything runs an investment cycle measured in years, since a barrel produced late this decade is a decision taken today.