Global Oil Market Architecture
OPEC, IEA, and Price Formation
Global oil prices are determined by the interaction of OPEC+ supply decisions and IEA-side demand and stock dynamics. Understanding this architecture is essential for UPSC's frequent questions on oil price determinants.
- OPEC (Organisation of the Petroleum Exporting Countries): Founded 1960 in Baghdad; current headquarters Abu Dhabi (UAE). 13 member countries including Saudi Arabia, UAE, Iraq, Iran, Kuwait, Libya, Nigeria, Venezuela, Gabon.
- OPEC+: An expanded alliance including Russia, Kazakhstan, Mexico, and other major producers — coordinating production cuts/increases.
- The 1973-74 Arab Oil Embargo: OPEC's Arab members (OAPEC — Arab OPEC subset) cut production and embargoed oil to countries supporting Israel, causing the first oil shock. This triggered the IEA's creation.
- Brent Crude: The global benchmark price for North Sea crude, used as the reference for most international oil contracts. Currently ~$112/barrel (March 2026).
- WTI (West Texas Intermediate): The US benchmark; typically trades at a slight discount to Brent.
- Price formation factors: OPEC+ production decisions, geopolitical risk premiums, US shale production, IEA stock releases, global demand growth (especially China and India), and USD exchange rates.
- The current 50% surge in Brent (to ~$112/barrel) reflects both the physical supply shock (11 mb/d lost) and a risk premium for ongoing infrastructure attacks.
● Tracked since March 23, 2026 · last seen April 20, 2026 · updates as the daily brief publishes
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