Qatar withdraws from OPEC

Qatar 4Qatar has announced to withdraw from OPEC on 1 January 2019, putting an end to its 57-year membership of the producers’ cartel

Qatar, which said it intends to focus on its gas production, made the announcement ahead of the 6 December OPEC meeting.

Lynn Morris-Akinyemi, research analyst, MENA upstream, at Wood Mackenzie, said, “The news should not come as a huge surprise. Qatar is OPEC’s smallest Middle East oil producer and the group’s fifth-smallest producer overall. Its total 2018 oil production is estimated at 600,000-650,000 bpd, less than two per cent of OPEC’s oil output.”

Ann-Louise Hittle, vice-president, macro oils, added, “Qatar has minimal spare capacity so its exit won't affect the volume of oil supply in the market during 2019 or risk OPEC's goal of reducing output next year. However, it does come at a time when OPEC needs to hammer out a deal in the face of market scepticism in the cartel’s ability to control production.”

“More positive for OPEC is the statement from President Vladimir Putin in Argentina at the G20 that Russia has agreed to cooperate with OPEC to ensure production restraint during 2019 as needed.”

Hittle said, “Rather than being a reaction to the 18-month long regional blockade against it, Qatar's withdrawal is more likely a result of its effort to focus on its place as one of the world’s leading gas producers. The smaller nations of OPEC have a relatively quiet role in the group's decision making and Qatar may also see that it has less to gain from its membership now that is not involved in the GCC.”

Morris-Akinyemi further noted, “Since lifting the 12-year ban on development of the North Field in April 2017, Qatar unveiled ambitious plans to increase its LNG capacity from 77 million tonnes per annum to 110 million tonnes per annum. This will be achieved via a new four mega-train LNG development, due onstream in 2023. Qatar’s OPEC exit underlines the country’s aim to maintain its place in the global LNG market.”

Ashley Kelty, oil and gas research analyst at Cantor Fitzgerald Europe, remarked, “The exit of Qatar is suggestive of growing dissatisfaction among OPEC nations with the Saudi’s leadership, and we’d suspect that many of the members are wary of how much influence the USA has over Saudi Arabia.”

“We are of the view that this will have a little short-term impact on OPEC, but the Saudis are certainly going to have to work harder to maintain agreement between the group on production cuts. It should not impact the decision to make production cuts this week, but the real issue is the scale of any cuts, along with timeframe and baseline against which production will be reduced. We remain concerned that any cuts may well be insufficient to curb oversupply in the near term, and that prices will struggle to recover the highs of recent months.”

Oil prices have been sliding since October but have rallied in the last few days in the wake of the easing of trade tensions between the USA and China, and Vladimir Putin's announcement at the G20 summit that Russia will continue to co-operate on output cuts with OPEC, which is set to meet on 6 December.

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