Oil & Gas

Earlier this month, OPEC and its partners from Central Asia and Russia postponed the planned rollback of production cuts originally agreed upon in 2023 to counter falling oil prices. As a result, OPEC+ will continue producing 2.2 million fewer barrels per day than before the cuts, at least until December. This decision may not sit well with some major oil companies, who would prefer to see higher production levels.

OPEC and Big Oil are often viewed as competitors, particularly with American giants like Exxon and Chevron, which dominate the shale industry—OPEC’s primary rival in recent times. However, the relationship is more complex because Big Oil is also a significant investor in OPEC's oil and gas operations. According to Jim Burkhard, vice president at S&P Global Commodity Insights, foreign investors need to see returns on their investments, making it crucial for OPEC members to balance production control with attracting foreign capital.

State control over production can be frustrating for private investors, as it limits potential returns. Nevertheless, OPEC remains an essential source of oil production and revenue for Big Oil companies. Even with the cuts, these companies continue to benefit from their investments in OPEC member countries. If profitability declines, as seen with Exxon’s exit from Iraq, major oil players may reduce their presence, but the overall partnership persists.

The relationship between OPEC and Big Oil has always been intricate, with both sides acting as partners and competitors. While production cuts can raise prices, benefiting both parties, Big Oil’s technological advances in oil extraction also provide mutual advantages. Despite the challenges posed by production control and national interests, the relationship is expected to remain complicated but enduring in the foreseeable future.