What is an OPEC Basket
The OPEC basket is a weighted average of oil prices from the different OPEC members around the world. Members of the Organization of the Petroleum Exporting Countries (OPEC) contribute data which forms the basis of the basket. The basket is a benchmark, or reference point, for those monitoring the price of oil and the stability of the global oil market.
Today, the OPEC basket averages the prices from Algeria, Angola, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. These fourteen countries represent the membership of OPEC. Many other countries throughout the world also produce oil. However, they are not OPEC members. Russia, the U.S., China, and Canada are all major oil producers but not OPEC members. OPEC’s member countries produce in total 40 percent of the world’s oil.
The OPEC basket is also known as the OPEC reference basket or the OPEC reference basket of crude (ORB).
BREAKING DOWN OPEC Basket
The OPEC basket has its basis on specific petroleum blends from OPEC member countries and is a weighted average. A weighted average is a mean, calculated by giving values to data influenced according to some attribute. In the case of the OPEC basket, the defining characteristic is the weight of the crude oil.
Some of these OPEC oils have higher sulfur content than crude oils from other countries. Hydrocarbons or crude oil, which have higher sulfur contents are more expensive to refine. Because of this, the OPEC basket is generally priced lower than other oil reference prices.
Other crude oil indexes include:
- West Texas Intermediate (WTI) crude oil is a lighter, higher quality oil, and sells for about $5 to $6 more than the OPEC basket price.
- The Brent blend from the North Sea which is generally refined in Northwestern Europe and sells at about $4 above the OPEC basket.
Oil prices matter a great deal to the global economy because the production and distribution of all consumer goods depend on petroleum. Oil fuels the trucks that transport goods, the tractors that plow agricultural fields, the cars that consumers use to get to the market and much more. OPEC provides a way for the member oil-producing countries to create stable market conditions for themselves by raising or lowering production by demand and availability.
The OPEC Basket Price Today
On April 26, 2018, the ORB stood at $71 per barrel. This price represents a steady rise over the previous month. On March 26, 2018, the ORB was $66.80. A year prior, it stood at about $51.47 and rose steadily throughout 2017. However, the average price per barrel for the past ten years has held relatively close to $76. This value means that the recent rise has brought prices back toward the average for the last decade.
The U.S. Energy Information Administration (EIA) provides a weekly average of global spot oil prices. The New York Mercantile Exchange (NYMEX) and other exchanges offer oil futures and derivatives.