The Strategist

Equatorial Guinea wants to join OPEC

01/27/2017 - 15:21

OPEC may invite Equatorial Guinea, which previously had supported OPEC’s initiative to limit production, in its ranks. EG is not a major producer and exporter yet it is a significant player in the oil market, so the deal would look interesting to OPEC’s leaders. EG’s entrance into the cartel can be supported by Saudi Arabia or its traditional opponent Venezuela.

Javier Blas
Javier Blas
Equatorial Guinea wants to join OPEC, said Gabriel Mbaga Obiang Lima, the Minister of Mines, Industry and Energy in the Republic of Equatorial Guinea. Last week Obiang visited Vienna, where OPEC is headquartered, and submitted proposals.

"For decades, Equatorial Guinea has had a reputation of a reliable supplier of oil to consumers in all corners of the Earth - said the Guinean minister. - We firmly believe that interests of Equatorial Guinea fully meet interests of OPEC, Africa and the global economy."

In turn, the cartel has its own incentives to expand its number of members as it would ensure its role of a major player in the global oil market.

Currently, OPEC consists of 12 countries: Algeria, Angola, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. EG may well become the 13th member of the cartel, but, on the other hand, this number has been "unlucky" number for OPEC. 

In November last year, Indonesia suspended its membership in the organization. The country used to leave the cartel before.

EG’s oil producing level is comparable to Gabon (213 th. barrels per day in December), but significantly less than that of Libya (608 th. barrels), not to mention such African OPEC members as Algeria, Nigeria and Angola (1.08 million, 1.54 million and 1.72 million barrels per day, respectively).

At the end of last year, Equatorial Guinea joined the oil freeze agreement, which OPEC concluded with a number of independent producers. The cartel must reduce production to 32.5 million barrels per day in the first half of the year. Independent producers have pledged to cut daily production to 558 th. barrels. Of them, only 12 th. barrels per day came from Equatorial Guinea.

In January, OPEC has improved its forecast for world oil demand in 2017 by 1.3%, or 1.16 million barrels per day, up to 95.6 million barrels per day compared with the figure of 94.44 million barrels per day in 2016. 
The forecast has been improving due to high demand for oil in the OECD European countries due to expectations of cold weather and higher fuel demand for transport.

Demand for oil produced by OPEC will rise by 0.9 million barrels per day to 32.1 million barrels in 2017, says the cartel. According to experts, oil production will increase in countries outside the cartel by 0.12 million barrels per day to 57.26 million barrels per day. The forecast was revised downward to 0.18 barrels per day in connection with agreement on reduction of oil production, which was signed by 11 countries outside OPEC.

At the same time, OPEC has revised forecast for production in the US in 2017 upwards by 0.23 million barrels per day due increase in number of drilling rigs and generous cash flow.