2016 maybe the "year of reckoning" for some OPEC member countries, RBC Capital Markets warned on Tuesday, ahead of the oil cartel's meeting in Vienna this week.
No agreement to freeze oil production is expected from the meeting, as OPEC, spearheaded by de facto leader Saudi Arabia, has repeatedly opted to maintain output in the face of plummeting prices.
Now, OPEC's weakest members — the so-called "fragile five" — may be at breaking point, with oil prices still too low for them to thrive, RBC said.
OPEC’s ‘fragile five’ are Algeri, Iraq, Libya, Nigeria and Venezuela
"2016 is shaping up to be the year of reckoning for the weakest members as crises unfold across OPEC," commodity strategists Helima Croft and Christopher Louney said in Tuesday's report.
"The crises across the cartel have taken different forms. Nigeria faces militancy, Venezuela a humanitarian crisis, and Iraq acute political and security challenges," they added.
Crude oil futures have rallied for the last two months, topping $50 per barrel on Thursday and trading above $49 since then. However, prices remain far below the $100-plus level at which crude traded before the market rout of June 2014 onwards.
Croft and Louney said $50/bbl was "unlikely to look like a victory" to the fragile five.
"These states, which were not structurally sound even when oil was above $100/bbl, were collateral damage of the policy to force the burden of adjustment onto high-cost producers," they said.
Nigeria has suffered a wave of attacks to its energy infrastructure this year that have knocked around 800,000 barrels off its daily oil production. These disruptions could last for a long time and potentially worsen, according to Croft and Louney.
In the meantime, unplanned outages from both Nigeria and Canada, which has suffered wildfires, have helped boost global oil prices by bringing supply and demand into better balance.
Although Venezuela has not suffered outages like Nigeria, its economic collapse means the Venezuelan energy sector lacks investment and suffers from power and service provider cuts.
Should the Venezuelan government prove unable to pay workers at state-owned oil company PDVSA, Venezuela too could suffer large production outages. Operations might also suffer if PDVSA defaults in the second half of 2016, as the government struggles to service its debt.
Iraqi oil production continues at record levels, according to RBC, but the country is grappling with a political crisis in Baghdad and a dire security situation. The country is likely to experience power cuts and rolling blackouts this summer, RBC says. Plus, the government has been forced to strengthen security around oil facilities in southern Iraq due to a spike in protests because of the alleged lack of economic opportunities generated by the energy sector.
So-called Islamic State (ISIS) militants have expanded their presence in Libya, as in Iraq. Croft and Louney said ISIS represented a direct threat to oil production in Libya, having sabotaged infrastructure and killed workers around their operational base in the east of the country.
The International Monetary Fund sees Libya's economy shrinking by a steep 2 percent this year.
"Algeria is facing the twin challenges of a fiscal crisis and a serious terrorism threat at a time when the aged head of state is largely incapacitated due to health problems," Croft and Louney said.
BP and Statoil temporarily withdrew workers from the country after a rocket attack on a major gas plant in Algeria in March, for which al-Qaeda claimed responsibility.
Croft and Louney added that Saudi Arabia appeared "unmoved" by the plight of poorer OPEC producers.
"We think continuity will carry the day in Vienna on June 2. We believe that the only real uncertainty is how divisive the meeting will be and how much discord will be put on public display," the strategists concluded.