Political turmoil threatens to double the OPEC-led supply cuts, introduced in 2016 in order to bolster oil prices following the 2014 decline.
In January 2017, OPEC led a supply cut deal, along with Russia and several other non-OPEC producers, in order to reduce the global supply glut that had developed since 2014.
However, OPEC has already reduced its daily output significantly more than the 1.2 million barrels pledged, which is largely down to global political events, such as those in Venezuela and Iran.
The economic crisis in Venezuela has hammered its oil industry, pushing production to the lowest levels in decade, with forecast predicting further decline. The country’s current daily production, at 1.5 million barrels, is 560,000 barrels lower than that of October 2016 – five times the amount Venezuela originally pledged, helping the blocs wider efforts.
Furthermore, if US President Trump re-imposes sanctions on Iran, the bloc’s supply cuts could double the original target set.
Trump will review America’s commitment to an international agreement to restrict Iran’s nuclear activities in exchange for relief from previous sanction, however he has been highly critical of the accord and experts predict a 70% chance of him reintroducing the sanctions.
Since the establishment of the OPEC-led deal, global oil stocks have reduced from as a high as 350 million barrels to as low as 50 million and oil prices have recovered to $70, but the increased output from the US has limited gains.
A tighter market with higher prices could have a negative impact on demand or encourage the US to increase its output even further.