What is OPEC? How the oil cartel works

OPEC, the Organization of the Petroleum Exporting Countries, is a group of oil-producing nations that coordinate how much crude oil they pump in order to influence its price. Founded in Baghdad in 1960 and based in Vienna, it had 11 members after the United Arab Emirates left on 1 May 2026. With Russia and other allies it forms a wider group, OPEC+. When it cuts output, prices tend to rise; its power is real but limited.

In short

• OPEC members agree production targets, often called quotas; pumping less tends to push the world price up, pumping more pushes it down.
• OPEC+ adds about ten other producers, led by Russia, and has set most output policy since 2016.
• Its grip is limited by members who exceed their quotas, by producers outside the group such as the United States, and by members leaving.

Who is in OPEC?

Five countries founded OPEC in September 1960: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They wanted more control over their oil, which at the time was largely priced and pumped by a handful of Western oil companies. Others joined over the following decades, and some left.

After the UAE's exit, the members were Algeria, the Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia and Venezuela. Recent departures include Qatar in 2019, Ecuador in 2020 and Angola in 2024. The UAE, which joined in 1967 through the emirate of Abu Dhabi, announced on 28 April 2026 that it was leaving both OPEC and OPEC+, citing a review of its production policy and capacity, as Energy Connects reported. Membership changes, so any list needs a date.

OPEC+ grew out of a deal in December 2016, when OPEC agreed joint production cuts with 11 non-member producers to lift prices after a long slump; one of them, Equatorial Guinea, later joined OPEC itself. Russia is the largest of the partners; Kazakhstan, Malaysia, Mexico, Oman and Sudan are among the others. Since then most big decisions on output have been taken by OPEC+ as a whole.

How does OPEC affect oil prices?

OPEC doesn't set the price of oil. Prices are set by trading on world markets. What OPEC controls is a large share of supply, and supply moves prices. The U.S. Energy Information Administration (EIA) puts OPEC's share at about 35% of the world's crude oil production and about half of the oil traded between countries, in figures from before the UAE left. As the EIA's page on OPEC and oil supply puts it, oil prices have historically tended to rise when OPEC lowers its production targets.

The mechanism is supply and demand with an unusual twist: in the short run, people can't quickly use much less oil. Drivers still need to get to work and planes still fly. So a small cut in supply can cause a large rise in price, as buyers bid for the barrels that remain.

OPEC's other lever is spare capacity: oil fields that could start producing within 30 days and keep going for at least 90, but are held back. OPEC members hold almost all of the world's spare capacity, and Saudi Arabia has historically held the most. That spare oil is the world's main cushion against a sudden loss of supply, such as a war or a blocked Strait of Hormuz.

Why don't members always stick to their quotas?

Because each member is tempted to cheat. A simple illustration, with made-up but realistic round numbers, shows why. Imagine a member with a quota of 3 million barrels a day, at a world price of $80 a barrel:

Choice	Barrels a day	Price, if the others hold their quotas	Revenue a day
Stick to the quota	3.0 million	$80	$240 million
Pump 10% over	3.3 million	$79 (one member's extra barely moves the world price)	about $261 million
Everyone pumps 10% over	3.3 million	$70 (the extra floods the market)	$231 million

Each member earns more by cheating if the others don't, but all earn less if everyone does. Economists describe it as a version of the prisoner's dilemma, and it is why OPEC's history is full of quarrels over who is overproducing. In recent years OPEC+ has asked members that exceeded their targets to make extra "compensation" cuts later. Quotas are also partly about pride and future capacity: countries that invest in new fields, as the UAE did, want quotas that let them use it.

When has OPEC changed the oil market?

A timeline of turning points:

Year	What happened
1960	Iran, Iraq, Kuwait, Saudi Arabia and Venezuela found OPEC in Baghdad.
1973–74	During the Arab–Israeli war of October 1973, Arab members embargo oil to the United States and other countries that supported Israel. The price first doubles, then quadruples; the embargo is lifted in March 1974.
1979–80	Iran's revolution and then the Iran–Iraq War cut supplies, and prices surge again.
1986	Saudi Arabia stops holding back output to prop up prices, and prices collapse.
2014–16	OPEC keeps pumping as U.S. shale oil grows, and prices fall by more than half.
2016	OPEC and 11 other producers agree joint cuts, creating OPEC+.
2020	As COVID-19 lockdowns crush demand, OPEC+ agrees a cut of nearly 10 million barrels a day, the largest ever.
2022	OPEC+ announces a cut of 2 million barrels a day from November.
2026	The UAE leaves OPEC and OPEC+ on 1 May.

The 1973 embargo, described by the U.S. State Department's Office of the Historian, is the moment most people mean when they talk about OPEC's power. It brought fuel shortages and long lines at gas stations in the United States, fed the inflation of the 1970s, and pushed rich countries to build emergency oil stockpiles and to drill outside the Middle East.

What limits OPEC's power?

The biggest limit is supply from outside the group. Shale drilling made the United States the world's largest crude oil producer from 2018. In 2023 it averaged 12.9 million barrels a day, the most any country has ever produced, according to the EIA. When OPEC holds back output to raise prices, high prices make it profitable for others to drill more, which wins them market share and weakens the effect over time.

Other limits come from inside. Members disagree about price and volume: countries with large populations and budgets to fund want high prices now, while those with huge reserves worry that high prices drive buyers to other fuels. Sanctions and conflict have cut the output of Iran, Venezuela and Libya at times, independent of any quota. And members can simply walk out, as Qatar, Ecuador, Angola and the UAE have.

Still argued

How much OPEC still controls oil prices is debated. Some economists argue it remains the market's most important single force, because its spare capacity and its decisions move prices within hours. Others argue its power has shrunk with U.S. shale, quota cheating and departures, and that it mostly follows the market rather than leading it. Over the longer term, the shift to electric vehicles and renewable energy to slow climate change raises a further question: whether oil demand will peak, and what a cartel built on oil does then. This note explains; it isn't financial advice.

Check yourself

• Without looking back: why can a small cut in oil supply cause a large rise in price?
• Why is each OPEC member tempted to produce more than its quota, and what happens if all of them do?
• Name two forces outside OPEC's control that limit how far it can push prices.

Sources

• Oil embargo, 1973–1974 — U.S. Department of State, Office of the Historian
• Supply: OPEC — U.S. Energy Information Administration
• United States produces more crude oil than any country, ever — U.S. Energy Information Administration, 2024
• UAE announces it is leaving OPEC and OPEC+ from 1 May — Energy Connects, 2026
• UAE says it will leave OPEC effective May 1 — Arab News, 28 April 2026