The price of oil is undergoing a brutal correction as speculation of a split between major oil producing nations circulates ahead of the next OPEC meeting.
The price of a barrel of crude has plunged by more than $5 in recent weeks and threatens to keep diving.
The slide has taken the price to $65 a barrel and more price volatility is expected this month as players in the market jockey for position ahead of the OPEC meeting in Vienna to discuss whether to continue a cap on output.
Two of the big producers – Saudi Arabia and Russia – are pushing to scrap the limits and up production despite the industry taking years to clear an oil lake filled by over production.
They see an opportunity to grab market share by stepping to fill space left by economically-challenged Venezuela, where production has virtually stopped.
The stage is set for a classic OPEC 11thhour climbdown and for production to rise by around 1m barrels a day.
SaRuPEC is on the horizon as Saudi Arabi and Russia get set to breakaway from the other oil-producing nations.
Iran is in a bind because US sanctions are about to bite that will plug the Middle East giant’s wells for some time to come and presents another opportunity to grab market share for the big two.
Jostling for position
The likely conclusion is OPEC will accept an increase in production by SARuPEC even though this is likely to push their prices down.
The argument will be increasing production does not lift the self-imposed OPEC output limit because the nations are merely shuffling the deck rather than redealing their hand.
Meanwhile, expect a lot of jostling for position and table-thumping in the lead up to the meeting later this month as the smaller players fight for their right to take a larger market share as well.
As with all OPEC meetings, plenty of drama is portrayed in the trailer, but when the feature comes, everyone smile and presents a calm and united front regardless of their behind-the-scenes battles.
Analysts reckon the market needs the production boost as demand is likely to rise in the second half of the year.