To cut or not: Which road will OPEC take?
What will come out of the OPEC meeting in Vienna on Friday? With some members of the oil cartel pushing for production cuts that would prop up prices, the tensions are rapidly rising. At least one analyst has described the atmosphere around the group's semi-annual gathering as "potentially explosive" as it decides whether to maintain or reduce current output.
The focus will be on the glutted global oil markets, caused by both the North American shale oil oom and OPEC's reluctance to reduce its output. That resulting flood of crude has pushed oil prices down by around 60 percent since the middle of 2014.
And while that drop has been excellent news for gasoline consumers in the U.S., it has also been an ongoing financial nightmare for OPEC members like Algeria, Ecuador, Nigeria and Venezuela, whose economies depend on petrodollars.
One issue on the minds of many oil industry analysts is growing tension within the Saudi royal family, which is said to be divided regarding the nation's current oil output strategy.
As the largest oil producer within OPEC (and second in the world behind the U.S.), Saudi Arabia has a de facto leadership role in the cartel. And by keeping OPEC's output at current levels, the Saudis have been playing a game of economic chicken with North American shale oil producers, trying to force them to break financially and slash output before OPEC does.
Reuters quoted a senior OPEC delegate, who asked not to be named, saying the cartel is unlikely to cut production at Friday's meeting. According to that delegate, the organization thinks it won't gain any ground while OPEC member Iran looks to increase its oil output after years of Western sanctions and while non-OPEC oil producers like Russia ignore calls for a united action when it comes to production levels.
But by refusing to consider a reduction in oil output, "Saudi Arabia is acting directly against the interests of half the cartel and is running OPEC over a cliff," Helima Croft, a former CIA oil analyst and now at RBC Capital Markets, told Britain's Telegraph last month. "There could be a total blow-out in Vienna."
But other analysts are less sensational with their projections.
"We expect OPEC's meeting this week to be a non-event that will not change the overall balance of the market," said a new report from Barclays. "Because there is near-universal consensus with this outcome, we believe that net-net the price change will be muted."
Jeff Mower, director of Americas Oil News for Platts, the energy and metals information firm, explains how OPEC's decision in either direction can lead to multiple outcomes.
If it announces an output cut, and if that cut was sizable and maintained, "then you'd definitely see an increase in crude prices, which would take surplus oil off the market," he told CBS MoneyWatch.
But Mower said such a reduction, and the ensuing higher oil prices, would also lure more North American oil producers back to the market.
"Right now, producers are cutting back a bit in the shale output production," he noted. "But they have all these drilled but uncompleted wells just waiting to come back on line once oil prices start to climb again. So, I think (a cut) would actually help North American producers, and I think OPEC knows that."
If, as expected, OPEC does maintain its current output, Mower believes oil prices could fall further, which would affect individual businesses tied to the oil industry but probably not the greater U.S. economy. However, he added, that depends on how global oil demand holds up into 2016. For example, if it rises, the oil surplus could end up being eroded.
U.S. consumers, however, might see prices at the gas pump slide a bit more in the near future. "I don't know if they've reached bottom yet," Mower said, "although it seems like they have."
On a broader level, he suggested that a continued decline in global oil prices could create new and dangerous situations in the nations that rely on oil money. That could in turn create an troubling economic ripple effect worldwide.