June 12 (UPI) — The biggest risks to the OPEC-led effort to stabilize the oil market are outside the Middle East and North African region, an Arab investment bank found.
The Arab Petroleum Investments Corp., a regional investment bank, published data Tuesday on the effort steered by the Organization of Petroleum Exporting Countries, now in its second year. With compliance over 100 percent, the effort has brought the surplus on the five-year average in commercial crude oil stocks held by the world’s advanced economies close to even.
“As demand growth continues to outpace supply, we could see further stock withdrawals,” Mustafa Ansari, a senior APICORP economist, said in a statement. “And with OPEC spare capacity expected to decline, especially if production cuts are eased, then the market will have a small buffer within which it can cushion itself against supply disruptions, leading to price hikes and higher volatility.”
Saudi Arabia, the de facto leader of OPEC, has responded to that small buffer by increasing production to around 10 million barrels per day. APICORP’s research found the main concern about the effort has been outside the Middle East and North African region, primarily Venezuela and to a lesser extent Angola, where field maturation has led to declining output.
For Venezuela, pressure from Western-backed sanctions, high debt and inflation pushed its oil production from around 2.4 million bpd at the end of 2014 to 1.4 million bpd in the first quarter, a 30-year low.
Already under increased pressure from economic sanctions, U.S. Secretary of State Mike Pompeo issued a call last week for Venezuela’s suspension from the Organization of American States. because of “an unconstitutional interruption in democratic order.”
Venezuelan President Nicolas Maduro faced widespread criticism for holding elections in his country early. By putting his opponents on their heels, Maduro last month secured another six-year term in an election his global critics called a sham.
In MENA, Iran may be the next to face production shortfalls later this year when U.S. sanctions snap back after President Donald Trump pulled the United States out of a multilateral nuclear agreement.
“Iran has a unique set of challenges to overcome, following the U.S. decision to re-impose secondary sanctions,” APICORP’s report read. “However, during the brief period when the sanctions were lifted, Iran managed to surprise by increasing output from 2.9 million bpd in 2015 to 3.8 million bpd today, surpassing pre-sanction levels of 3.6 million bpd.”