Tuesday, January 24, 2017

Augmenting OPEC?

Equatorial Guinea, the third-largest oil producer in sub-Saharan Africa and home of Africa's longest-serving dictator, has expressed interest in joining the Organization of Petroleum Exporting Countries (OPEC) as its fourteenth member. The bid for membership was presented by Gabriel Mbaga Obiang, President Teodoro Obiang's son and minister of mines and hydrocarbons in the Equatoguinean government, at an OPEC compliance monitor meeting in Vienna over the weekend. A government press release notes that oil and gas account for 95 percent of Equatorial Guinea's $10.6 billion in annual exports.

Last September, OPEC members agreed to cut oil production in an effort to boost sagging oil prices. Then, on December 10, ten non-OPEC oil-producing states including Russia and Equatorial Guinea agreed to join with OPEC members to cut production by a total of 1.8 million barrels per day through the first six months of 2017. For Equatorial Guinea, that means cuts of 12,000 barrels per day from a production level of 240,000 barrels per day.

In spite of apparently successful efforts by OPEC and the ten non-OPEC producers to cut production, the U.S. Energy Information Administration is predicting only modest increases in oil prices through 2017 and 2018. Thus far, the strength of domestic oil production in the U.S. has largely canceled out efforts elsewhere to raise prices by cutting production.