Cheap Oil Affects Countries Worldwide – Oil Industry Update

  November 1, 2016

A non-routine meeting set for late September in Algeria disrupted oil markets as the meeting was seen as a precursor to production level changes. Non-OPEC member Russia, the world’s largest oil producer, is set to attend the meeting and could announce moves to help stabilize oil prices. Low oil prices have created a precarious situation for those countries that primarily rely on oil to keep their economies intact. Venezuela, the leader in proven oil reserves, could run out of cash within a year as well as dealing with a serious food shortage. Over 95% of the country’s total trade revenue is dependant on oil. The IMF estimates that inflation in Venezuela will reach 720% this year, and a projected 2,200% in 2017. Shortages are widespread with everything from food, beer, and medical supplies to toilet paper.

Oil markets expect a production cut agreement to evolve from the Algeria meeting, which will help stabilize prices from their two-year plunge. An obstacle to essential production cuts may continue to be Iran, which has declined to entertain a production freeze until its output returns to pre-sanction levels.

Sources: OPEC, IMF, Bloomberg

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