OREANDA-NEWS. July 06, 2016. OPEC is putting recent turbulence behind it, with Gabon officially joining the organization in the week ended July 1 after a hiatus of more than 20 years and Nigeria's Mohammed Barkindo set to take over as the group's new secretary general a month from now.

At its June 2 meeting, OPEC finally agreed on a leader, after several previous attempts failed to find a consensus. Barkindo replaces Abdalla el-Badri, who served in this post for almost 10 years, in what can be considered as the most difficult years for OPEC.

Analysts said they didn't expect OPEC's market share strategy to change any time soon but they admit that these two new developments inject such much needed positivity after a spate of infighting and disagreements. The moves could also prove significant, both symbolically and psychologically, for the group, some believe.

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"I do not expect the appointment of Mohammed Barkindo to have a material impact on OPEC policy, but the June meeting may have laid the groundwork for future cooperation on bigger issues," said Richard Mallinson, geopolitical risk analyst at Energy Aspects.

Indeed, OPEC's decision to maintain its freewheeling production policy in June lies in contrast with its failure to agree on a production freeze when it met with non-OPEC producers in Doha in April. Hence, these two developments come at a critical juncture for the organization and could help put a fractious period behind it.

OPEC is "not as united as it used to be," said Ehsan Ul-Haq, an analyst with consulting firm KBC. "However, it [OPEC] might regain its shine soon due to falling non-OPEC output, while Saudi Arabia does not seem to be interested in further splits within the organization as has been apparent by different statements given by the new Saudi oil minister," he said.

One of the main aims of OPEC's market-share strategy has been to squeeze high-cost producers, such as US shale and Canadian oil sands, and some argue that this is now working. Non-OPEC production is predicted to drop by 900,000 b/d in 2016 on the year, which is resulting in the gradual rebalancing of the market, according to the International Energy Agency's most recent monthly market report.

"The next few years are likely to be critical for the group, as it treads through a world, which is still awash in shale oil reserves," he added.

Restoring OPEC unity

The return of production targets could rear their head again. Last December, OPEC failed to agree a target output level after an acrimonious meeting, effectively abandoning the idea of a production ceiling following on from two years earlier when quotas were abolished.

An OPEC without production quotas in particular has put the group's relevance into question and it remains to be seen whether Iran -- which has seen production now return to post-sanctions levels -- and Saudi Arabia can form a greater consensus inside OPEC at the November 30 meeting.

Speaking at a press briefing after the last meeting, Barkindo conceded that the "perception of lack of unity" was a concern for its members but that OPEC had what it takes to restore the confidence of the international community and the global oil markets.

"We need to work to regain the unity of the organization and confidence of the international community and particularly the industry and markets...Together, I believe we can overcome whatever difficulty we are facing temporarily," he said. "But the fact that OPEC has decided to elect a secretary general today after so many years of haggling is in itself a positive signal not only to the market but to the international community that OPEC is back, stronger," he added.

There are also signs that OPEC will eventually have to change its strategy in order to grow long term. After the last meeting, new Saudi energy minister Khalid al-Falih hinted that OPEC might have a somewhat more limited role, in which responding to supply shortfalls would be key.

OPEC would best spend its time serving as a producer forum to exchange ideas on the market -- while retaining the ability to respond to global supply shocks and smooth out price spikes, he declared. "I think managing in the traditional way that we tried in the past may never come again," the former Saudi Aramco CEO told reporters.

OPEC's newest old member

Gabon's oil minister, Etienne Dieudonne Ngoubou, visited the OPEC headquarters in Vienna on June 30 and said the African producer was delighted to rejoin the organization after more than 20 years.

Analysts said Gabon wanted to be part of a club in a time of low oil prices and high volatility, along with hopes that this could lead to more bilateral agreements between the countries.

"The return of Gabon, just six months after Indonesia rejoined, is intended to be a signal that OPEC remains relevant and is a group that producers want to be part of," said Mallinson. "However, given the low volumes that Gabon producers it does little to enhance the influence of OPEC of market fundamentals."

In an interview with the Wall Street Journal in May, Gabon's President Ali Bongo Ondimba said it wanted to be part of OPEC so it could help "protect" the market. "It's not so much about influence, as the common effort we should all be doing to protect the market," he said in the interview.

Gabon originally joined OPEC in 1975, before leaving in 1994. Gabon will now be OPEC's smallest producer with current production ranging between 240,000-250,000 b/d and exports accounting for around 210,000 b/d-225,000 b/d of that total, according to Platts estimates.

The newest OPEC member, like its other West African neighbors, has been hit hard by falling crude prices, with oil accounting for about half of government revenues and 80% of national exports. Oil production in 2015 was close to 250,000 b/d-260,000 b/d, while production in 2014 was just above 260,000 b/d, according to Platts estimates.

Production reached a peak of 365,000 b/d in 1996 but has since steadily declined mainly due to the maturing fields and also because of a lack of any significant oil projects over the past decade. Gabonese crude attracts a fairly broad and eclectic customer base, including refiners in Trinidad & Tobago, France, Malaysia and Australia.

Gabon exports six main crude grades. The two medium sweet flagships are Rabi Blend and Rabi Light and make almost half of the country's exports. Other export grades include Oguendjo, Lucina, Etame and Mandji, also medium- to-heavy sweet grades that attract a broad set of buyers.

Gabon has been focusing on increasing its oil output in the past year, and it launched its 11th licensing round late-October for five deep water blocks in the southern basin.