By Sunny Atumah
As the International Energy Forum, IEF biennial meeting convenes next week in the Mediterranean port city of Algiers, participants may be glimmering for opposing forces to effectively cancel each other out and maintain stability in what has been described as the longest and deepest oil price decline since 1986.

The IEF accounts for 90 percent of global oil and gas supply and demand. It has the largest gathering of energy ministers, international organisations, CEOs, experts and senior officials from 72 countries including Nigeria. It comprises prominent members of power blocs including OPEC, Group of Seven, G7 industrial nations, the G20, International Energy Agency, Organisation for Economic Cooperation and Development, OECD; and the BRICS (Brazil, Russia, India, China and South Africa).

The 15th International Energy Forum, IEF15 scheduled for the Algerian capital from 26 to 28 September 2016, would have price regimetake centre stage. Global geopoliticssparked off crude oil prices slumpby over 60 percent in the summer of 2014 and resonating in supply glut. Aflurryof who controls production and market share led to the present global instability.

First were the American drillers whose shale outpaced global oil supply from January 2011 to June 2014 to make America the number one oil producer. Between June 2014 and September 2015 the Middle East producers’response of increasing production and market sharedwarfed the American dream of becoming a price giver. The American deployment of shale rigs is still vulnerable with total drilling rigs at 416 by last week.It thus rekindled the 1973 American support for Yom Kippur Arab-Israeli war that led to the first oil embargo.

Coming to common grounds had severally appeared gloomy but gladiators in the crude oil power play, Saudi Arabia and Russia that were up in retaliatory oil moves in a crisscross of geopolitical strongholds of market share are now in arelaxant mood against previous feelings ofhopelessness and despair in oil production freeze.

Saudi Arabia made significant inroads into European market and was accused of selling oil to Poland at dumping prices.In December 2015, Saudi Arabia was reported to have discounted crude oil to two most important markets, the United States and Asia, two days before the 168th OPEC meeting. The Saudis with considerable offshore downstream investments in the United Stateslowered official selling price for all crude grades.

Russia in turn struck deals with the largest oil importer, China, along with huge gas pipeline deals.  A fit of temper betweenthe two petroleum grooms, Saudi Arabia (a marginal supplier) and Russia culminated in petroleum brides,China (largest global petroleum importer and second consumer) and Europe, both marginal consumersbeing wooed with generous price discounts of crude oil to secure markets in 2015.

Importers benefitted from a generousoversupply of crude coming from Russia and the Middle East inwhat portrayed oil bazaars.With cutthroat competition, some OPEC membersgalvanized support for a fair deal in crude pricing. In discordant tunes, some contemplated output pare down (reducing output gradually), while others increased output for survival.

Last year,the Saudis conditionalitywas that unless co-leading producer, Russia was in the production cut deal, OPEC should count her out.That meant the Saudis are slow to react to production cut, so the glut continued with low oil prices as theycontrolledthe market share.With economies in cleft stick,OPEC non-Gulf members Nigeria, Venezuela, Algeria, Angola and Ecuador expressed disenchantment in the no deal communiqué that came after the OPEC meeting in December. Venezuela which has been hard hit proposeda strategy akin to the late 1990s price band that made OPEC keep a floor price above $70 per barrel.

The April 17 2016 disagreement in the Qatari capital of Doha rekindled fears that the two major producers went back to issues of market shares which drove prices to a 13-year low of $27 per barrel in January after the December 2015 Vienna meeting ended without a decision on production cap.It was disappointing for the non-OPEC producers Russia and Mexico that yielded to pressures for negotiations on crude oil market stability deal. A freeze was again not achieved at the OPEC’s scheduled meeting of June 2, 2016 at the Vienna headquarters.

Recent eventsat the sidelines of the G20 meeting in China on September 5, 2016, witnessed a joint press conference by the Russian Energy Minister Alexandr Novak in company of his Saudi counterpart, Khalid Al-Falihwho said Russiawas ready for production freeze. It is still not clear how Russia would contemplate production cap when speculations are rife that by year end an additional 200,000 barrels would come online from her Caspian oil field.It is also doubtful whether Saudi Arabia would go for an oil freeze,thus raising concern of a repetition of more talk without action.

Prominent oil leaders have had high level diplomatic descants for production cuts.

Algerian Energy Minister Noureddine Boutarfa last week in Paris held meetings with the Saudi Energy, Industry and Mineral Resources Minister, Khalid Al- Falih and the IEF Secretary General Xiansheng Sun. He also held a meeting with OPEC Secretary General, Nigeria’sMuhammed Barkindo on the world oil market and the preparation for the OPEC sideline meeting. Boutarfa had diplomatic shuttles to Moscow, Tehran and Doha on oil stability.

Venezuela Oil Minister Eulogio Del Pino last week canvassed for a cut in global oil production from 94 mmbpd to 85 mmbpd to sustain consumption. Venezuela’s President Nicolas Maduro also said that OPEC and non-OPEC members were close to reaching a deal to stabilize oil markets. Iranian President Hassan Rouhani pledged his country’s support for oil market stability.

Impediments for some OPEC countries like Nigeria that relied heavily on crude for export revenue has a production reprieve from militant activities, to ramp up supplies to two million barrels per day. Iran had stuck its guns on returning to pre-nuclear sanctions 4 million barrels per day production to reclaim lost ground. Libya is coming back with about 1.2million barrels per day by year end.

OPEC abandoned its traditional role of swing supplier since November 2014. Currently it is producing about 33.5 million barrels per day far and above its quota of 30million barrels. Implication is that most oil companies have cut their capital expenditure (CAPEX) from 10-30 percent since 2015. With the American drilling activity down by over 50 percent the current price level of about US$50 can only support about 33 percent new production. (Boston Consulting Group)

Survivals of some countries threatened by depressing oil prices are devaluing currencies. A cut now may have significant impact on prices since the level of oil in storage is decreasing and consumption increasing.  Oil gluts may continue to lower oil prices, reduce revenues and occasion tighter budgets for liquid fossil fuels dependent economies. The danger signal is economic volatility which should be addressed at the International Energy Forum.