Africa may push OPEC back to the drawing board

Published Jan 3, 2017

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The shift to the global oil order that happened at the end of 2016 may not be as sticky as you think.

OPEC's November 30 deal in Algeria turned oil market

expectations for 2017 on their head. Instead of a fourth straight year of

rising global oil inventories, stockpiles look set to actually shrink.

The plan was to cut output by nearly 1.2 million

barrels a day in the first half. That agreement was followed by a pledge from a

group of non-member countries to trim their production by almost 560 000

barrels a day. This is still what's expected.

These deals led the International Energy Agency and

others to forecast that the long-awaited oil market rebalancing could begin

almost immediately. But, as the agency warns, only if the agreement is

implemented in full.

Read also:  Oil starts New Year higher

OPEC's members seem fully committed to the cuts, but, as

I've written, the biggest threat could come from those countries who were left

out of the deal. OPEC members Libya and Nigeria were exempt from the cuts and

both have already made progress in restoring output curtailed by unrest.

If they meet their ambitious plans for further increases

in the coming months they could seriously undermine the efforts of their

fellows.

That could jeopardize the foundation of the November

agreement and leave OPEC and its allies needing to consider a further cut even

before the last one is fully implemented.

This column does not

necessarily reflect the opinion of Bloomberg LP and its owners.

BLOOMBERG

 

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