Smaller oil producers expected to follow the leader at OPEC meet

Published June 1st, 2016 - 10:00 GMT
A number of smaller producers had become overly dependent on oil as a source of revenue, when prices were high, and did not make efforts to diversify their economies.  (Twitter)
A number of smaller producers had become overly dependent on oil as a source of revenue, when prices were high, and did not make efforts to diversify their economies. (Twitter)

Smaller producers within Opec are expected to toe the line of bigger oil producers like Saudi Arabia in maintaining output, despite their economies facing severe difficulties due to the drop in global oil prices.

“There is big division within Opec among groups of countries. The economies of some countries like Nigeria, Venezuela and Algeria are strained right now. But I don’t think that gives them the capital to be able to pressure for any king of change in production policies within Opec,” said Edward Bell, a commodity analyst at Emirates NBD.

He said a number of smaller producers had become overly dependent on oil as a source of revenue, when prices were high, and did not make efforts to diversify their economies.

“Even if the price trades at $50 [Dh183] it’s still going to be quite a while before you have any kind of changes or reforms in lot of these economies that can accommodate these lower oil prices. The prices are not going to rally much beyond where they are now,” he added.

“Even Gulf producers are under pressure due to drop in oil prices but they have cash reserves to overcome the problem.”


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