Whilst Gulf OPEC countries have welcomed the return of $50 oil, their more economically fragile peers are finding the current price almost unbearable. For these weaker countries, the current price is not high enough to save their faltering economies nor low enough to instigate any collaboration amongst the world’s largest oil producers. Some analysts have labelled these countries the “Fragile Five”, which consists of Algeria, Iraq, Libya, Nigeria and Venezuela.
Iraq has suffered from political and security-related challenges, whilst Nigeria’s oil production has nearly halved due to resurgent militant attacks. The latter’s oil minister, Ibe Kachikwu said that although the market is “moving in the right direction…we need an acceleration in the pace”. OPEC’s uncompromising production policy has been heavily criticised by the cash-starved producer nations, especially in the context of prices that crashed to their lowest level in more than a decade. For wealthier Gulf states, the Saudi-led policy of squeezing higher-cost production has been vindicated by a drop in non-OPEC output.
Nonetheless, despite statements made by the kingdom’s new oil Minister Khalid al-Faith, who wants to soften the self-interested image of Saudi Arabia, the country still demonstrates an aggressive push for market share over rival producers. For instance, on Thursday, the state oil company Saudi Armco announced a new long term oil supply deal with Polish refiner PKN Orlen, a traditional buyer of Russian crude. Furthermore, talks over freezing crude output in April with non-OPEC countries such as Russia collapsed after Riyadh wanted Iran, Saudi’s regional rival, to be part of the deal. Helima Croft at RBC Capital Markets predicts 2016 to be the year of reckoning for the weakest OPEC members. She stated, “These states, which were not structurally sound even when oil was above $100 a barrel, were collateral damage of the policy to force the burden of adjustment on to high-cost producers”, adding that recovery to $50 a barrel was “unlikely to look like a victory to them”.