‘The pain is set to deepen’ for most of OPEC’s 13 members

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An anti-government protester walks next to a burning kiosk during a protest at Altamira square in Caracas, Venezuela.
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Reuters/Jorge Silva

Talks in Doha concluded without a deal.

But while a few OPEC members can continue waiting out the lower-for-longer environment, others are on the brink of disaster.

“With the Doha meeting ending in a bust, the pain is set to deepen for the vast majority of sovereign producers and physical oil output is increasingly at risk in several of the more distressed countries,” RBC Capital Markets’ Global Head of Commodity Strategy Helima Croft wrote in a note to clients.

“Many of these countries were struggling with pronounced political and security challenges when oil was above $100/bbl and they are now being forced to seek emergency lending facilities and in some cases adopt unorthodox crisis management measures to make the math work and keep their citizens from taking to the streets,” she explained.

And for what it’s worth, the RBC team notes that for worse-off OPEC members, even a possible rebound to $50 a barrel by the end of 2016 would be “anything but fabulous.”

Take a look at how each OPEC member is weathering geopolitical, economic, and security risks at the moment. The countries are listed from least to highest risk, with 10 being the highest.


United Arab Emirates continues to sit “in the sweet spot.”

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Sheikh Mohammed bin Rashid Al Maktoum, PM and VP of the UAE and ruler of Dubai.
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Thomson Reuters

Risk for next year: unchanged – 2

Oil production last month: 2.89 million barrels a day (mb/d)

Oil production 2015 average: 2.88 mb/d

The UAE benefits from a small population and flush sovereign-wealth funds ($1.19 trillion). It’s also a more diversified economy, with strong hospitality and transportation sectors.

But it’s not all peaches and cream for the oil producer. The IMF previously cut the country’s 2016 forecast to 2.6% from 3.1%, the slowest projected-growth rate in 10 years.

Source: RBC Capital Markets


Qatar’s “challenges will emerge later this decade.”

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Qatar’s Foreign Minister Khaled al-Attiya.
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Thomson Reuters

Risk for next year: unchanged – 2

Oil production last month: 0.65 mb/d

Oil production 2015 average: 0.67 mb/d

Qatar has been one of the strongest players in MENA, and remains one of the wealthiest nations in the world on a per-capita basis. IMF figures suggest that Qatar only spent about 0.6% of GDP ($1.2 billion) on energy subsidies in 2015.

However, Qatar relies heavily on LNG, and RBC Capital Markets thinks its problems will “emerge later this decade.”

Additionally, some analysts are getting worried that Qatar’s credit boom looks increasingly unsustainable and “could pose a threat to the country’s future.”

Source: RBC Capital Markets


Iran has seen a reversal of fortunes — and it definitely doesn’t want to cut production.

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Iranian Foreign Minister Mohammad Javad Zarif
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Leonhard Foeger/Reuters

Risk for next year: unchanged – 3

Oil production last month: 3.20 mb/d

Oil production 2015 average: 2.81 mb/d

Iran has seen a “reversal of fortunes” after sanctions were lifted – and it’s not planning to freeze production just because its regional archrival, Saudi Arabia, wants it to.

“Doha highlights the poor state of affairs between Iran and Saudi Arabia,” John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy, told Bloomberg News earlier. “It shows the big split between Saudi Arabia and its Gulf allies on one side against Iran and Iraq.”

Source: RBC Capital Markets


Kuwait’s population doesn’t want austerity, and its oil workers have gone on strike.

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Kuwait’s Foreign Minister Sheikh Sabah al-Khaled al-Sabah arrives to attend a Gulf Cooperation Council (GCC) meeting in Riyadh, Saudi Arabia, March 12, 2015.
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Reuters/Faisal Al Nasser

Risk for next year: increased – 3

Oil production last month: 3.00 mb/d

Oil production 2015 average: 2.85 mb/d

“We raised our geopolitical risk assessment for Kuwait from 2 to 3 on the back of pushback against austerity as oil workers go on strike in the country, protesting against government cutbacks as it grapples with the prolonged slump in oil prices,” writes Croft.

Source: RBC Capital Markets


Indonesia has “good economic prospects.”

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Indonesian President Joko “Jokowi” Widodo.
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Darren Whiteside/Reuters

Risk for next year: increased – 3

Oil production last month: 0.73 mb/d

Oil production 2015 average: 0.79 mb/d

Indonesia is the newest OPEC member, and, notably, the only other G-20 member aside from Saudi Arabia. It’s not the biggest oil producer, but like the rest of the pack, it has to deal with the reality of lower oil prices.

Still, the RBC Capital Markets team notes that Indonesia has “good economic prospects.”

Source: RBC Capital Markets


Ecuador is looking a bit better as its president remains popular.

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Ecuador’s President Rafael Correa.
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Guillermo Granja/REUTERS

Risk for next year: decreased – 5

Oil production last month: 0.55 mb/d

Oil production 2015 average: 0.54 mb/d

“We lowered our geopolitical risk assessment for Ecuador from 6 to 5, as the president remains popular given the administration’s track record,” writes Croft.

Source: RBC Capital Markets


Angola has turned to the IMF for help.

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Angola’s President Jose Eduardo dos Santos.
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Thomson Reuters

Risk for next year: increased – 6

Oil production last month: 1.84 mb/d

Oil production 2015 average: 1.80 mb/d

“We raised our geopolitical risk assessment for Angola from 5 to 6 as public criticism mounts and the finances of the country worsen, and the country turns to the IMF for financial support,” writes Croft.

Moreover, earlier in April, Capital Economics’ John Ashbourne argued that the fact that Angolan authorities have reached out to the IMF suggests that authorities are slowly but surely “realizing the scale of their country’s economic problems.”

Source: RBC Capital Markets


Saudi Arabia doesn’t want to freeze production unless Iran does, too.

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Saudi Arabian oil minister Ali al-Naimi.
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Leonhard Foeger/Reuters

Risk for next year: increased – 7

Oil production last month: 10.19 mb/d

Oil production 2015 average: 10.24 mb/d

Saudi Arabia remains adamant about not freezing production unless others (read: Iran) do too.

Moreover, Deputy Crown Price Mohammed bin Salman noted ahead of the Doha talks that the Kingdom could increase output to 11.5 million barrels a day right away, and up to 12.5 million within six to nine months “if we wanted to.”

In the background of all this, Saudi Arabia is also simultaneously juggling budget pressures and regional security issues, including an expensive proxy war in Yemen.

Source: RBC Capital Markets


Algeria has political instability and serious security challenges.

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Algerian President Abdelaziz Bouteflika.
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Eric Gaillard/Reuters

Risk for next year: increased – 8

Oil production last month: 1.10 mb/d

Oil production 2015 average: 1.10 mb/d

Algeria continues to see political uncertainty and high security challenges, Croft notes.

Moreover, Algeria’s oil and gas revenue declined to $35.72 billion in 2015 from $60.3 billion in 2014. And foreign reserves slipped to $153 billion in September 2015 from $179 billion at the end of 2014, according to figures previously cited by RBC Capital Markets.

Source: RBC Capital Markets


Libya’s security situation hasn’t gotten worse yet … which is kind of a positive sign.

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Firefighters try to put out the fire in an oil tank in the port of Es Sider, in Ras Lanuf, Libya, January 23, 2016.
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Stringer/Reuters

Risk for next year: decreased – 9

Oil production last month: 0.33 mb/d

Oil production 2015 average: 0.39 mb/d

“We lowered our geopolitical risk assessment for Libya from 10 to 9, as despite there being three rival governments, the security situation has not worsened the situation for the country yet,” writes Croft.

Still, the team adds that Libya’s still facing very high risk given that it’s the “fallback option for Islamic State (if it loses its strongholds in Iraq and Syria).”

Source: RBC Capital Markets


Iraq has analysts wondering how long it can hold out with huge economic and security problems.

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A worker walks at Nahr Bin Umar oil field, north of Basra, Iraq, December 21, 2015.
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REUTERS/Essam Al-Sudani

Risk for next year: unchanged – 10

Oil production last month: 4.35 mb/d

Oil production 2015 average: 4.03 mb/d

Analysts continue to wonderhow longthe country’s oil divisioncan hold out in light of the ongoing economic and security issues.

“Iraq has had the twin troubles of both a security and economic crisis at the same time,” Croft wrote back in February.

Source: RBC Capital Markets


Nigeria struggles as armed militants have succeeded in bringing oil production offline.

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A villager shows a bucket of crude oil spilled at the banks of a river after a Shell pipeline leaked, in the Oloma community in Nigeria’s delta region, November 27, 2014.
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Tife Owolabi/Reuters

Risk for next year: increased – 10

Oil production last month: 1.82 mb/d

Oil production 2015 average: 1.94 mb/d

“We raised our geopolitical risk assessment for Nigeria from 9 to 10, as militancy in the delta has indeed brought production offline this year. Buhari’s war against corruption in the Niger Delta continues, as does the threat from Boko Haram in the north of the country,” writes Croft.

Additionally, the sharp acceleration of Nigeria’s inflation suggests that the government’s FX controls and its efforts to fix the retail cost of petrol have “failed” big time.

Source: RBC Capital Markets


Venezuela has “few, if any, economic levers left.”

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Opposition supporters take part in a march against the government of Nicolas Maduro in Caracas, Venezuela, October 18, 2014.
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Jorge Silva/Reuters

Risk for next year: increased – 10

Oil production last month: 2.44 mb/d

Oil production 2015 average: 2.48 mb/d

“We raised our geopolitical risk assessment for Venezuela from 9 to 10, as there are few, if any, economic levers left,” writes Croft.

“The country remains short of basic services, companies have stopped operating, and the president has changed the workweek and the country’s time zone among other things. Oil workers and thus oil production may be the next casualty, pushing it higher in our OPEC Watch List.”

Source: RBC Capital Markets


And now check out …

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Local miner Cesar Abac uses a wooden bowl and mercury to pan for gold near the village of Las Cristinas, southern Bolivar State, Venezuela.
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Reuters/Henry Romero

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