The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental organization established to coordinate and unify the petroleum policies of its member countries. It is an institution that functions as a collective to influence the global oil market and maximize profit for its members.
OPEC was created at the Baghdad Conference from September 10–14, 1960, by five founding members: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. The organization was formed to solve the problem of the international oil market being dominated by powerful Anglo-American oil firms, known as the "Seven Sisters," which kept oil prices low and limited the benefits for oil-producing nations. Its objective is to secure fair and stable prices for petroleum producers, ensure an efficient supply to consuming nations, and provide a fair return on capital for investors.
The core mechanism of OPEC is the collective management of oil supply through the use of production quotas. Member countries agree on a total level of production, which is then broken down into a quota for each member, based on factors like reserve capacity and production. These quotas are intended to balance oil supply with demand to defend prices and ensure stable revenues. In 1968, OPEC adopted a "Declaratory Statement of Petroleum Policy in Member Countries," which asserted the right of all countries to exercise permanent sovereignty over their natural resources.
A key related institution is OPEC+, a larger group formed in late 2016 that includes the OPEC members plus ten non-OPEC oil-producing countries, such as Russia, Kazakhstan, and Mexico. This framework allows for broader coordination to stabilize the global crude oil market.
Recently, the OPEC+ group has been actively adjusting production targets, such as the agreement on April 5, 2026, to implement a production adjustment of 206,000 barrels per day starting in May 2026. This adjustment is part of a process to unwind previous voluntary cuts, but analysts have called the move "symbolic" because conflict in the Middle East has severely disrupted the physical flow of oil through the Strait of Hormuz. Furthermore, a new mechanism was approved in November 2025 to annually assess and update each member's maximum sustainable production capacity, which will be used to set output targets for 2027 and beyond. The core mechanism of setting production quotas remains, but the process for determining the underlying capacity has been amended.