Opec’s ‘fragile five’ find life unbearable at $50 oil

Gulf Opec countries are hailing the return of $50 oil but for their more economically fragile peers the current price is proving to be unbearable.

“Venezuela will not default but all the countries are finding financing more difficult and have to find ways in a very difficult market,” said Eulogio Antonio Del Pino, Venezuela’s oil minister, on Wednesday, report Anjli Raval and David Sheppard in Vienna.

Venezuela’s acute fiscal crisis has led to power cuts and other shortages while Nigeria’s oil production is suffering from militant attacks. Political and security challenges are raging across Iraq.

The group’s inability to come to an agreement on production policy in the face of prices that crashed to their lowest in more than a decade this year, has drawn criticism from producer nations facing a cash crunch who have deemed the organisation a failure.

“Nigeria does need every dollar it can get,” said Emmanuel Ibe Kachikwu, Minister of State for Nigeria and head of the country’s national oil company.

Although the market is “moving in the right direction” he said “we need an acceleration in the pace” through coordinated action.

Both ministers were speaking in Vienna ahead of Thursday’s meeting of Opec.

“These states, which were not structurally sound even when oil was above $100 a barrel, were collateral damage of the policy to force the burden of adjustment onto high-cost producers; a recovery to $50/bbl is unlikely to look like a victory to them,” said said Helima Croft, global head of commodity strategy at RBC Capital Markets.

For the weakest members that also include strife-ridden Libya and economically weak Algeria – deemed the “Fragile Five” by analysts — the current price is worst of all. It is not high enough to save their economies nor low enough to instigate any collaborative action among the world’s biggest oil producers.

Suhail bin Mazrouei, the UAE’s oil minister, on his arrival in Vienna on Tuesday signaled the strategy to not cut production to bolster prices was working to balance supply and demand.

His remarks suggest the status quo will continue to hold this week.

“We see that the price is correcting upwards,” he said. “The rules of the market, which are supply and demand, are working.”

“The market will fix itself,” he said.