Oil in Global Economy Series: Six countries threaten OPEC, N-OPEC deals

After reaching $58.3 per barrel in early January, the Price of North Sea benchmark Brent has declined by five dollars per barrel fearing that an increased price would increase the supply from N-OPEC countries which weren’t part of the deal like the United States. However, there are several countries that are either part of the OPEC or the deals that undermine the prospect of the agreements.

• Firstly, there is Iran. The rogue OPEC member throughout the last year indicated that it intends to return to its pre-sanctioned level of production, which is above 4 million barrels per day. However, as per the deal, the country needs to restrict its output to 3.8 million barrels per day. So the possibility of cheating remains large.
• Second is Libya. The country is exempted from the deal and recently it has brought back the pipeline connecting to its largest production site, which could add 360,000 barrels per day to the OPEC production within a matter of few months.
• Third is Iraq, the country that fought hard for exemption citing past civil wars and currently increasing its exports from the reference month of the deal.
• The fourth is Nigeria, which is again exempted from the deal and plans to increase production by 600,000 barrels per day from the current 1.6 million barrels per day.
• Saudi Arabia, as of now showing signs of keeping to its commitment to production cuts, however, that might change if Iran’s status of sanctions change under the Trump administration or Iran is found to be cheating on its commitments.
• Finally Russia, which has a history of non-compliance to the cuts and will enjoy a longer horizon of time to bring down its production by 300,000 barrels per day.