We reported on Monday that Qatar is set to leave the Organisation of Petroleum Exporting Countries (OPEC) to focus on plans to increase its natural gas. Qatar’s surprising move comes just days before OPEC is to meet in Vienna on Thursday. However, Qatar will still be sending its delegates to the OPEC meeting in Vienna.
Here's Energy Minister Saad Sherida al-Kaabi's statement on Qatar's withdrawal from OPEC in January 2019.
Read more: https://t.co/ASwtiXc4KR pic.twitter.com/XYkYMEMtuc
— Al Jazeera English (@AJEnglish) December 3, 2018
Qatar was the first country to join OPEC after the five founding nations – Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Now, it’s the first Middle Eastern nation to leave the group.
Qatar is OPEC’s smallest oil producer with around 600,000 barrels per day (bpd) against the cartel’s total output of roughly 33 million bpd. Still Qatar played a pivotal role in OPEC negotiations since the country joined the cartel in 1961. In 2016, amid falling oil prices, Qatar backed Saudi Arabia and its regional rival Iran to reach an agreement on production cuts.
Qatar accounts for less than 2% of total OPEC’s output, so its withdrawal may not have a notable consequence. However, Qatar's exit could encourage other small crude oil producers who are growing disgruntled with the cartel’s dominance by Saudi Arabia and Russia to do the same. If a group of small producers decides to exit the cartel it will decrease OPEC’s control in the market.
Qatar sees OPEC as an organization that is fast losing its shine. After all, the only players who call the shot in the cartel are Saudi Arabia and Russia.
Twitter handles were abuzz with Qatar’s announcement of leaving OPEC after 57 years. A tweet said: "It is better if OPEC breaks, free market may stabilise oil prices.”
“Strategically, withdrawing from OPEC frees Qatar to pursues its considerable interests and clout in its key industry- natural gas…Time for Qatar to be one of the biggest players in a gas cartel”, said another tweet.
Qatar’s announcement to leave OPEC stirred up a storm in global energy market. Doha-based energy experts and audit firms held urgent internal meetings to take stock of the situation. They debated "what does the withdrawal mean to OPEC and global energy market and to Qatar?”, reports The Peninsula Qatar.
"Our experts are discussing the deeper implications of Qatar’s decision to exit the cartel. But we have decided not to share our thoughts on public domain at this point of time,” a top audit firm’s communications officer said to Peninsula Qatar.
Energy-sensitive firms and other audit firms also held similar internal meetings, soon after Qatar announced its decision to exit OPEC.
According to the Reuters, following are analysts’ views on the likely impact on oil and LNG markets:
“Qatar leaving the OPEC isn’t as great news for the oil market and the market participants haven’t digested the full impact of this news. Basically, Qatar is have brought the biggest weapon out and it only means more instability between the Qatari and Saudi relationship.”
“In fact, we would not be surprised if other counties start to follow the same path and then we have no control over supply or demand as each individual country could just do what they like.”
“Other producers can certainly look towards Qatar and work directly with Qatar, and mitigate their dependence on countries such as the U.S., which does not have the same position as Qatar or have the reserves that Qatar has.”
“Major impact would be on China’s dependency on the U.S. and we see that relationship definitely going down from here.”
“While we are not viewing Qatar’s exit from the Cartel as a significant price driver, it does appear to diminish the historical clout of OPEC while increasing the importance of a Saudi-Russian alliance in coordinating production decisions.”
"It could signal a historic turning point of the organisation towards Russia, Saudi Arabia and the United States. Doha's exit would have a "psychological impact" because of the row with Riyadh and could prove "an example to be followed by other members in the wake of unilateral decisions of Saudi Arabia in the recent past."
“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.”
“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.”
“Qatar’s OPEC exit underlines the country’s aim to maintain its place in the global LNG market.”
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