OPEC & OPEC+, Explained

01What the club is and how it works

OPEC — the Organization of the Petroleum Exporting Countries — is a permanent intergovernmental body whose members collectively agree on how much crude oil to produce. Founded in Baghdad in 1960 by Saudi Arabia, Iraq, Iran, Kuwait and Venezuela, it was born from a shared frustration: the major international oil companies then set posted prices unilaterally, and producing nations wanted a seat at the table. Over the following decades membership grew to include Libya, Algeria, Nigeria, Gabon, Equatorial Guinea, Congo and others, while members such as Qatar and Indonesia have at various points joined, left or suspended participation.¹

The mechanics are straightforward in principle. Member countries meet — typically twice a year, though extraordinary meetings happen whenever the market demands — and negotiate a collective production ceiling, then apportion individual quotas. Each country's quota is its formal pledge to cap output at a specified level. Because crude oil prices are set by global supply and demand, controlling the volume of oil that flows out of member states gives the group leverage over where the price settles. More supply, all else equal, pushes prices down; withheld supply tightens the market and supports prices. The tool is blunt, but the logic is simple.²³

What makes the system complicated is that the tool is also voluntary. OPEC has no enforcement mechanism beyond diplomatic pressure and mutual self-interest. A country that produces above its quota gains revenue in the short run; the collective penalty is that everyone's price falls. This tension between individual incentive and group discipline has never fully gone away. Quota compliance has historically been uneven, and the group's credibility rises and falls with how strictly members honour their commitments.

02OPEC+: the expanded coalition

For the first five decades of its existence, OPEC's authority was bounded by a hard reality: it represented a shrinking share of world production. As oil fields developed in the North Sea, Alaska, Mexico and elsewhere, non-OPEC supply grew, and the cartel's grip on the market loosened. The shale revolution sharpened that constraint dramatically — American tight oil output surged to levels that made the United States one of the world's largest producers, entirely outside OPEC's reach.

The response was OPEC+. In late 2016, following a period of sustained low prices that hurt every producing nation, OPEC struck a landmark cooperation agreement with a group of non-OPEC oil exporters led by Russia. The expanded alliance — informally called OPEC+ — now includes around two dozen countries. Russia is by far the largest non-OPEC participant, and its inclusion was a significant shift: for years Russia and OPEC had operated as rivals. Together, OPEC+ countries account for a substantial share of global crude production, giving the coalition considerably more market weight than OPEC alone.

The structure remains looser than OPEC itself. OPEC+ members do not join the original organisation; they coordinate under a separate framework, meeting alongside OPEC to agree joint production targets. The same compliance challenges that exist inside OPEC are present here too, and with more members and more divergent national interests, reaching consensus requires more negotiation.

Russia is by far the largest non-OPEC participant, and its inclusion was a significant shift: for years Russia and OPEC had operated as rivals.

03The limits of OPEC+'s power

Understanding what OPEC+ can and cannot do is as important as understanding what it is. The coalition's greatest leverage lies in spare capacity — the ability of key members, most notably Saudi Arabia, to raise or lower output relatively quickly. When spare capacity is ample, a credible threat to open the taps can discourage other producers from overproducing or force prices lower to punish defectors. When spare capacity is thin, the group's room to manoeuvre narrows.

Demand is entirely outside the group's control. If global economic growth slows, fuel consumption falls, and no production cut can fully offset a collapse in demand — as the world discovered when the pandemic brought oil markets to their knees. On the supply side, the group cannot control output from non-participating producers. American shale operators respond not to OPEC quotas but to the oil price itself; when OPEC+ cuts prop up prices, they can inadvertently incentivise more drilling outside the coalition, partly offsetting the cut. This dynamic — sometimes called the free-rider problem — has been a persistent structural frustration.

Member interests also diverge in ways that create internal friction. Countries with lower production costs and large reserves favour stable, moderate prices that sustain demand long-term. Countries with higher fiscal breakevens — the oil price needed to balance the national budget — need higher prices and may resist output increases that keep prices and revenue low. When these interests collide, the agreed policy can end up as a compromise that satisfies no one fully.

Finally, geopolitics reaches inside the coalition. Sanctions, conflict, infrastructure problems and political instability can prevent a member from meeting its quota — whether high or low — regardless of what has been agreed. The target and the reality of production can diverge for reasons entirely beyond the group's control.

OPEC and OPEC+ are neither all-powerful nor irrelevant. They are the closest thing the oil market has to a coordinating body for supply, and their decisions genuinely move prices. But they operate inside a market that is bigger, faster and less predictable than any producers' club can fully manage.

1. posted price — the official price at which a company offers to buy crude, historically set by oil majors ↩
2. production ceiling — the maximum collective output a group of producers agrees not to exceed ↩
3. quota — an individual country's assigned share of a collective production ceiling ↩