In this article, I am not interested in looking back to the past challenges of the organization but I prefer to review its future challenges in brief.

In the short term, OPEC faces the challenge of surplus oil supply especially the surplus supply of heavy crude oil in the market. On the other hand, due to the state of the global economy and the uncertain situation of China's economy, oil demand growth faces uncertainty. This simple situation prompted OPEC and its allies (OPEC Plus) to postpone their unwinding supply reduction adjustment program for two months. Currently, the United States of America, Canada and Brazil account for about 31% of the world oil supply, which can exacerbate the oversupply problem.

Despite all the fundamental drivers, non-fundamental drivers also affect the market, including trading activities through electronic commerce by relying on artificial intelligence (Algo-Trading) and regional geopolitical factors. What is very clear is that price elasticity is very sensitive to changes in the fundamentals because any change in the fundamental factors can have a significant impact on the oil price. In the meantime, the oil market is less sensitive to non-fundamental factors, especially geopolitical factors.

It is worth noting that the expectations of OPEC and the International Energy Agency (IEA) about oil demand in 2024 are significantly different, and I must point out that uncertainty, especially about demand, and especially the dark and vague outlook of China's economy, plays an important role in this difference. The second half of 2024 could be the start of a stronger seasonal period of oil demand than the previous months, and a significant increase in demand growth can play an important role in realizing OPEC+ plans.

Similarly, it should be noted that in the second half of 2024, the strong supply by other non-OPEC suppliers will face OPEC+ plans with serious challenges. IEA believes that the additional production in countries such as the United States, Argentina, Brazil, Canada and Guyana will reach 4.8 million barrels per day in the medium term. In the meantime, the spare capacity of OPEC member countries should not be ignored.

According to Bloomberg's latest report, the surplus capacity of the countries of Saudi Arabia, the United Arab Emirates and Iraq, along with the main members of OPEC Plus, will reach more than 8 million barrels per day in 2030. In the short term, these challenges will increase the necessity of continuous cooperation among the members of OPEC+ to stabilize the market and maintain energy security.

Will Hares, one of the energy analysts, believes that without a significant increase in demand in the second half of 2024, the OPEC+ alliance may have to extend its voluntary oil reductions until the end of 2024. He believes that such a challenge may prompt some members of OPEC to quit the organization, like what happened to Angola.

Now, I try to examine the challenges of OPEC in the long term. The most important challenge of OPEC in the long term is the energy transition debate, which must be followed and coordinated carefully by the members in the upcoming meetings of the Climate Change Convention (COP). It is very important that any energy transition plan be implemented gradually because any sudden transition will cause irreparable shocks in the energy market, and in this regard, OPEC has tried to act very carefully.

In the COP28, this issue was carefully followed and in the COP29, OPEC will continue it by presenting the common points of view of the members. International companies and organizations have very different views about reducing fossil fuel production. As long as it concerns fossil fuel production, OPEC has made the necessary arrangements so far but I should announce that this challenge can put pressure on OPEC and fossil fuel producers to some extent after 2030.

As a founding member of OPEC, Iran has shown utmost cooperation so far and will do the same in the future. At the end, I congratulate OPEC on its 64th anniversary.

By: Dr.Afshin Javan, Iran's governor for OPEC