Only two OPEC countries are at break even with $50 oil

Bloomberg/Fuel Fix:
Oil’s 53 percent recovery since January hasn’t boosted prices enough to relieve the economic pain that pushed some members, notably Venezuela, into a state of crisis. Worse still, crude is sliding back toward $40 a barrel as demand growth slows and the slump in U.S. production levels off, with drilling again on the rise.
Venezuela, Iraq, Nigeria, Algeria and Libya were dubbed by RBC Capital Markets as OPEC’s ‘Fragile Five,’’ the countries most at risk of political turmoil as they struggle to balance their budgets. Only Kuwait and Qatar are close to their fiscal break-even points with oil prices at $50 a barrel, according to the International Monetary Fund. Saudi Arabia, while needing higher prices, can tap its foreign currency reserves, the world’s fourth largest, to cover any shortfall.  (Emphasis added.)

“Clearly, it’s a very divided organization,” Mike Wittner, head of oil market research at Societe Generale SA in New York, said by phone. “There’s the haves and have-nots. The haves are the core Gulf countries, and then there’s everybody else. In a long and painful down cycle, those divisions become starker than ever.”
Venezuela’s embattled socialist government is struggling to pay for vital imports and service debt, while enduring the sharpest contraction in a decade and the highest inflation rate in the world. Barkindo’s native Nigeria is suffering a recession for the first time since 1991 and a plunge in its currency to a record low as the oil rout is compounded by militant attacks on pipelines and other facilities.
There is much more.

The fundamental flaw in OEC's market share policy is that they did not anticipate that US shale producers could lower their production cost to a point where they were profitable at $50 and in some cases less.  The organization still has not reconciled itself to living in a competitive environment and its current policy allows US shale producers to put a ceiling on the price that OPEC can get for its oil.

If the cartel is to survive it is going to have to accept the fact that the US is not a competitor in the oil and gas market and much of US production will go to offsetting imports.  If they do not, their current strategy is likely to destroy the economies of most of its members.


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