Magazine article African Business

It's Time for African Oil Producers to Get Serious about Diversification: With a Return to the Boom Years of Oil Prices Unlikely, Africa's Producers Are Faced with Some Hard Decisions

Magazine article African Business

It's Time for African Oil Producers to Get Serious about Diversification: With a Return to the Boom Years of Oil Prices Unlikely, Africa's Producers Are Faced with Some Hard Decisions

Article excerpt

When members of the OPEC oil cartel agreed a historic output reduction deal last December, convincing 11 non-members including Russia to commit to taking about 1.8m barrels per day out of global supplies, producers everywhere breathed a sigh of relief.

It was hoped the deal would bring to an end almost two years of misery for oil-reliant economies, in which the price of a barrel of crude collapsed from more than $110 to under $55. OPEC had finally come to the rescue, performing its traditional role of controlling world stocks to shore up the price.

Seven months later, any enthusiasm for the deal has all but evaporated. After a brief uptick, which sent Brent crude into the high fifties, prices have continued to slide amid a persistent glut. They have not touched $55 since April, sinking to as low as $46.95 in June. This despite OPEC's best efforts--compliance has been solid, and the deal has even been extended into 2018.

OPEC is looking increasingly like a spent force amid a persistent glut, with analysts talking of a new normal for oil around the $50 mark. Far from reducing global stocks, oil tanker storage levels at sea hit a 2017 record of 111.9m barrels in June. Meanwhile the booming US shale oil industry--a principal culprit behind the glut--has announced a record 5,946 newly drilled wells for 2017, which could result in a production boost in the second half of the year.

All of this spells trouble for African producers, who have been left reeling from the collapse in prices. …

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