The GPM Global Forecast is a bi-weekly, members-only article series for 2016. It provides analysis and short-term forecasting on key military, political, and economic events around the globe.

OPEC ‘Game Changer’ Deal Hangs in the Balance

OPEC met in September and agreed in principle on a deal to restrict output to 32.5-33 million barrels per day, down from the approx. 33.64 barrels that the cartel’s members are currently pumping.

The deal was hailed as an important step forward, as evidence that an output freeze would lead into a scaling back of exports in an effort to regain some measure of price control. But as is so often the case with OPEC’s struggles to coordinate: the devil is in the details.

Now the September agreement is in jeopardy ahead of a November 30 meeting, one which was supposed to be the time when the cartel puts its finishing touches on the policy. Now there are reports that OPEC officials are scrambling at the last minute to get everyone behind the output rollback.

The holdouts are all the usual suspects. Some of the more optimistic officials believed that Russia might be convinced to coordinate with an OPEC production cut, despite past experience and Moscow’s restricted toolbox in controlling its domestic energy industry. The oil ministers of Algeria and Venezuela have reportedly flown to Moscow ahead of Wednesday meeting to try and convince the Russians to get on board.

A Russian refusal could undercut a Saudi commitment to a rollback, perhaps even a freeze. The Saudis will be worried that they will reduce output and simply allow Russia to increase its market share in key Asian markets like China and India.

Iraq and Iran are also fighting a production cut for obvious reasons. Iran’s output still languishes at 4.15 million barrels a day after a decade of sanctions. Iraq’s energy industry has also been beaten back by war and a lack of foreign investment. Both governments argue that they should be exempt from having to scale back production; just one day before the meeting, both are pushing for allowances to increase their exports.

Looking forward, it’s hard to imagine that OPEC overcomes all of its hurdles and reestablishes price control on oil, which is currently hovering around the $45 mark (WTI). Simply put, there’s just too many oil producers putting out too much product, and agreeing on an OPEC cut is like a classic prisoner’s dilemma, and one where key players like the United States and Russia aren’t even at the table.

That said, there has been a lot of talk about OPEC’s future relevance, and the cartel backed itself into a corner by presenting the September agreement as a done deal (likely by design for short-term price relief). Now as the judgement day of November 30 fast approaches, this has all become a matter of face, and the question on everyone’s minds: Is this the beginning of the end for OPEC?