The myriad issues that Angola is struggling with right now, including declining production and weak prices, reflect the challenges ahead for Isabel dos Santos and the country’s oil industry.
Sharp growth in the downstream sector could simply shift the gigantic surplus of crude to the refined products market, undermining profit margins in all regions.
Nothing will change materially in the oil market until there’s a significant stock draw, a development that appears doubtful, which could ultimately force OPEC to change strategy once again.
Besides today’s costly oil disruptions, the government in Nigeria is preoccupied with the ISIS-affiliated Boko Haram in the north and sectarian strife elsewhere.
OPEC is expected to finalize the details of its production cut next month, but in the meantime, the entire arrangement looks like a mess, with hole after hole being punctured before it’s even been fully agreed upon and implemented.
OPEC's past cuts were successful in tightening the global oil market and lifting prices, but the agreement last week in Algiers may not be sufficient to rebalance fundamentals, particularly since U.S. shale is poised to rebound.
Rhetoric aside, OPEC exports to the U.S. are up 20 percent year over year. U.S. production has fallen by more than 1 million barrels per day over the past 18 months, creating a supply gap that has been filled with OPEC oil.
While progress with militant groups could portend the stability Nigeria needs to meet its goal to significantly rebuild its oil production capacity, the country still faces many challenges. Given its dependency on oil revenues, it's important the government continues to make peace with militants.
OPEC’s talk about an agreement on a production freeze in late September has dominated headlines, scaring financial investors with short positions. But more important than the rhetoric about capping production is the possibility of more supply from the cartel returning to the market.
Matt Smith is Director of Commodity Research at ClipperData, a company that tracks global cargo flows of crude and products. He speaks to The Fuse about data transparency, trade flows, and recent price trends.