Coronavirus and collapsing oil prices have hollowed out budgets of oil-producing countries, raising fears of instability.
High-ranking officials of two major IOCs will go on trial in Milan for bribing Nigerian officials to secure lucrative contracts, marking the third major corruption scandal that has touched large oil companies in recent years.
The fact that Nigeria is considering prepayment deals with traders these deals is significant. It reflects how countries that are highly dependent on oil income are taking extraordinary measures to maintain stability while oil prices are relatively low.
A clumsy exit strategy, producers cheating on quotas, or a rapid response from U.S. shale producers could undermine the effectiveness of the deal. Conversely, the potential for higher prices is also a stark possibility.
An extension is virtually guaranteed but today’s overwhelming consensus masks real divisions, complications and misgivings.
When producers that are inherently prone to conflict and resource nationalism lose supply, output will most likely not return to previous levels.
OPEC’s gamble to cut production to shore up prices has not worked out the way members thought it would, but the cartel cannot be faulted for not trying. The inadequacy of its policy in the first part of 2017 means that OPEC will do whatever it takes during the second half of the year to achieve its goals.
One solution to reducing dependence on imports would be to build pipeline capacity connecting the Bakken area to refineries on the East Coast.
In the aftermath of the 2014 price fall, producer countries have had to reevaluate policy and economic strategy while contending with a persistent glut that may dampen prices for some time, further undermine their budgets, and possibly cause domestic strife.
As the group doubles down on its production cut, questions linger about exit strategy, capability, and size.