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“The key unknown is the flexibility and competitiveness of the U.S. shale-oil sector,” said Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies. “Until U.S. shale oil technology progress stabilizes, if at all, the key threat to OPEC will remain shrouded in mystery.”

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In the absence of shale oil, Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies, said he believes oil producers would agree to extend the output cut deal.

But if the extension is secured, U.S. shale-oil will continue to expand, he said.

“I believe that [OPEC has] underestimated the positive reaction from shale oil, and that in light of this, I would say the likelihood of an extension is around 40%, heading downward,” said Al-Ubaydli
Still, “in an attempt to maintain market confidence, rather than doing ‘no deal’, they may do a reworked deal to project unity,” he said.

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Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies, singled out two scenarios. “Either they agree on each country producing optimally from its own perspective, and they will present it as if it is a collective agreement…or they will try to agree on something substantive and fail,” he said.

In both cases, he expects to see only a “negligible effect” on prices as “oil markets are getting a little wiser to OPEC’s ineffectiveness and window-dressing.”

Still, Al-Ubaydli, does see a downside price risk. “Trump is likely to enact policies that decrease U.S. oil imports,” he said. And a rise in shale oil production means that “prices above $60 a barrel are unlikely.”

That said, “Trump’s policies will have an effect once their precise details are confirmed,” said Al-Ubaydli. “Everyone is holding their breath.”

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Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies, referred to the output cap speculation as a “red herring.”

Everyone is producing as much as they can or want to produce anyway, “so an output freeze is equivalent to all the runners in the 100-meter final saying: ‘Let’s agree to not run faster than 9 seconds’.”

“In that case, they just want to project collective power,” said Al-Ubaydli, who’s also an affiliated senior research fellow at the Mercatus Center at George Mason University.

Some producers may intend to exhibit “willful production restraint,” but an agreement would “unravel within days or weeks since there is no reliable way to monitor cheaters and everyone has a history of cheating,” he said, adding that OPEC had a 96% output quota violation rate from 1980 to 2009.

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“In my opinion, there’s nothing going on here, at least as far as oil markets are concerned,” said Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies.

He believes the “developments reflect geopolitics.”

“In the case of Saudi Arabia and Russia, both countries are seeking closer relations, and they want to project a good relationship to the rest of the world,” said Al-Ubaydli, who’s also an affiliated senior research fellow at the Mercatus Center at George Mason University. “They both know that there’s no chance of effective cooperation in oil markets due to market forces, but there’s no harm in having an extra meeting, and issuing mutually supportive statements.”

“In the case of Iran, their government officials are always happy to engage the media, especially now that sanctions have been lifted,” said Al-Ubaydli. “They like to make statements that suggest that their voice is important in global affairs, even though the reality of oil markets is that Iran and all other producers are slaves to market forces.”