Merrill Lynch: OPEC's market share to increase over long term

The Organization of Petroleum Exporting Countries' market share will likely rebound to 40%, according to Merrill Lynch & Co., and it will do so without an oil price war.

April 4, 2002

2 min read

By OGJ editors
HOUSTON, Apr. 4 -- The Organization of Petroleum Exporting Countries' market share will likely rebound to 40%, according to Merrill Lynch & Co., and it will do so without an oil price war.

"Many bearish calls relating to oil prices and energy shares center around the notion that ultimately OPEC will be forced to 'crash prices' to increase market share relative to non-OPEC producers," Merrill Lynch said in a research note. "These arguments generally focus on OPEC's short-term reduction in market share as the organization reduced output to compensate for slowing demand.

"OPEC's outlook, however, is over the longer term, and longer term, the secular slowing in the rate of non-OPEC supply growth leaves OPEC in the strongest position since the 1970s," it said.

Generally, OPEC's market share has been 39-40% since 1992, Merrill Lynch noted. "While OPEC's market share did briefly decline to 38% in the first half of 2002, the need for 2 million b/d of incremental OPEC oil during the second half of 2002 will rapidly bring OPEC's market share back to 40%," it said.

Merrill Lynch concluded, "To OPEC's credit, the organization has successfully mitigated the impact of a rapid decline in global demand, without negatively impacting its market share (under a normal economic environment)."