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Emerging Markets Turmoil Revives a Dreaded Old OPEC Ghost

  • Oil cartel has memories of the impact of 1997 Asian crisis
  • Saudis are likely to adopt a more cautious policy approach
Aerial Views Of PT Pertamina Oil Tankers And Storage Facilities As Indonesia Rejoins OPEC

Photographer: Dimas Ardian/Bloomberg

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For more than two decades, OPEC has tried to avoid repeating a mistake that cost it dearly. In November 1997, at a meeting in Jakarta, Saudi Arabia convinced fellow oil producers to boost output, ignoring a crisis brewing in emerging markets.

The output increase came at the worst possible time. What in November 1997 looked like a hiccup, by mid-1998 was a full emerging-markets crisis spreading to Russia and Brazil. Global oil demand growth slowed, in part because of an unusually warm winter in the northern hemisphere. Benchmark oil prices fell below $10 a barrel, the lowest since the 1973-74 oil embargo.