OPEC’s Coffers Are Drying Up

OPEC’s members brought in less cash from selling oil in 2016 than in any of the past dozen years. That grim reality comes to us courtesy of the U.S. Energy Information Administration (EIA):

Members of the Organization of the Petroleum Exporting Countries (OPEC) earned about $433 billion in net oil export revenues in 2016, the lowest since 2004. In real dollar terms, the 2016 revenue represents a 15% decline from the $509 billion earned in 2015, mainly because of the fall in average annual crude oil prices and, to a lesser extent, because of decreases in OPEC net oil exports.

That 15 percent year-on-year decline is a dramatic example of the fiscal pain these petrostate regimes are enduring as a result of the collapse in crude prices. Those low prices come to us courtesy of American shale producers, whose output contributed to a global glut that brought prices from their $100+ per barrel levels down to the $50 range they occupy today.

Those lost export revenues are why OPEC, along with a group of 11 other petrostate producers (including Russia), have agreed at last to reduce their collective output in an attempt to rebalance the market. But a look at the latest data shows that that rebalancing is going to take a lot more time than was initially envisioned, and Riyadh and Moscow both think they’ll be constraining production through March of next year.

In the meantime, U.S. producers are seeing their own output rise and the numbers in their balance books turn black once again. Suppliers all around the world are adjusting to $50 crude, which is why oil guru Daniel Yergin believes the days of $100 oil are behind us—barring a major supply disruption. If that’s the case, then OPEC’s member states are going to have to get used to their recently tightened belts, because they won’t have the opportunity to loosen them anytime soon.