Charges that OPEC Has No Plan to Reduce Glut Come Amid Reports that Venezuela is on Brink of Collapse

Non-compliant UAE says that better times may be imminent.

Amid growing hostility toward the Organization of the Petroleum Exporting Countries (OPEC) from the analytical community for failing to rebalance the market as promised, and as all eyes focus on the cartel's meeting in St Petersburg next week to asses the situation, some experts believe there is no concrete plan to end the oil glut - and the meeting will result in further turmoil.

Mike Wittner, head of oil market research at Societe Generale SA, said OPEC is "between a rock and a hard place: the bottom line is [the output reduction agreement] hasn't worked" and "if they cut more, the more they support prices, the more they support U.S. production."

Bloomberg added that if the cartel abandons the agreement and increases output, "a further plunge in prices would inflict more pain on their economies."

The current problem with the cutback is that Libya and Nigeria are producing far more crude than anticipated, and even though rumours abound that OPEC will ask the two countries to cap their production this week, Ed Morse, head of commodities research at Citigroup Inc., said he doubts they will comply; moreover, as both producers are approaching the limits of their capacity, any agreement to cap would be symbolic.

Of course, as the July 24th meeting approaches there is still positive sentiment about the near future of the market, and on Friday one unsurprising optimist was the United Arab Emirates, which is among the OPEC members that have failed to reduce production despite agreeing to do so.

Suhail bin Mohammed al-Mazroui, energy minster for the UAE, said on Friday, "We have seen healthy demand and a flattening of rig counts in the United States; this is the beginning of the third quarter, and demand picks up in the third quarter, and I hope the agreement will have a significant impact in the third and fourth quarter."

He added, "The UAE is committed to its cut."

But if observers grow weary of rhetoric coming from OPEC and its boosters, they may see more substance in events such as those unfolding in Venezuela, whose bonds crashed last week as president Nicola Maduro sought to re-write the republic's constitution, which Bloomberg points out would "effectively disenfranchise the millions of Venezuelans who oppose him and entrench his regime."

That has triggered talk of U.S. sanctions against the country, one of them being the banning imports of Venezuelan crude to the U.S., currently around 600,000-700,000 barrels per day.

This, along with reports that Venezuela's economy will have shrunk by 32 percent by the end of this year, caused Helima Croft, global head of commodity strategy at RBC Capital Markets, to remark, "We may be about to see the first sovereign producer to unequivocally fail."

While the impact of U.S. sanctions or Venezuela's collapse on the world crude market have yet to be fully understood, one thing is certain: for every imminent disaster facing oil, there are plenty more on the horizon: last week, just as talk reached a fever pitch about the calamity caused by rampant Libyan and Nigerian output, news broke that Ecuador would no longer be part of the OPEC cutbacks - which prompted observers to worry that this would encourage other OPEC members to follow suit.