The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris explore a historic decision from Qatar to leave OPEC, effective January 1, 2019. Qatar’s decision has much to do with OPEC plus and Russia’s expanding role in the global oil market.
Just days before the cartel (along with its outside accomplices) is due to meet in Vienna for what could be another historic meeting, OPEC is dissolving right before our very eyes, as the perceived “US influence” over Saudi Arabia has strained ties within the bloc. As we pointed out on Friday, the increasingly “problematic” perception that Saudi Arabia is accelerating production to appease President Trump – and subsequently that the entire bloc’s policy is now subject to undue US influence – has reportedly brought several OPEC members to the verge of mutiny.
And on Monday, just hours after the conclusion of the G-20 summit in Buenos Aires, Qatar announced that, after more than 55 years of membership, it would be leaving the bloc effective Jan. 1. While countries have left OPEC before, Qatar’s departure is more significant than its declining oil production might suggest: Since forming in 1960, no other Persian Gulf Countries have left (though Ecuador and Gabon once left, only to return, and Indonesia has suspended its membership).
According to Al Jazeera, the Qatari television network, Qatari Energy Minister Saad Sherida al-Kaabi broke the news overnight. It was later confirmed by Qatar’s state energy company, which clarified that Qatar would be leaving OPEC effective Jan. 1.
Qatar announces it was withdrawing from the Organization of Petroleum Exporting Countries “OPEC” effective 1 January 2019.
— Qatar Petroleum (@qatarpetroleum) December 3, 2018
Qatar, of course, has every reason to be angry with the Saudis. A blockade against Qatari exports remains intact following the GCC crisis of summer 2017. And just like then, when we pointed out that the “real reason for the Qatar crisis was natural gas”, so the Qataris have teased that they are leaving OPEC to “focus on LNG”.
Speaking at a news conference in Doha, al-Kaabi said: “The withdrawal decision reflects Qatar’s desire to focus its efforts on plans to develop and increase its natural gas production from 77 million tonnes per year to 110 million tonnes in the coming years.”
The country’s reason for leaving is evident in the numbers: Since 2013, the amount of oil it is pumping has declined by more than 725,000 barrels a day even as global oil production has soared.
Al Jazeera’s correspondent Charlotte Bellis said that Qatar made the decision just days ahead of a December 6 OPEC meeting.
“They say it has nothing to do with the blockade on Qatar and that they have been thinking about it for several months now,” Bellis said, referring to a diplomatic blockade on Qatar by Saudi Arabia, the United Arab Emirates (UAE), Egypt and Bahrain.
“They also said that if you want to withdraw from OPEC it had to be done before the end of the year,” she added.See Also
“They said they wanted to do this now and be transparent ahead of a December 6 OPEC meeting.”
Since 2013, the amount of oil Qatar produced has steadily declined from about 728,000 barrels per day in 2013 to about 607,000 barrels per day in 2017, or just under 2 percent of OPEC’s total output.
Meanwhile, total production during the same period increased from 30.7 million barrels per day to 32.4 million barrels per day.
Despite Putin’s claim that he and Saudi Crown Prince Mohammad bin Salman had agreed to extend the current OPEC+ production cuts, Wall Street analysts – not to mention investors – are still pricing in further cuts for the bloc. Goldman expects production to be reduced by 1.3 million b/d, nearly double the 700k b/d priced in by the Brent futures curve.
Ultimately, Qatar’s departure won’t have much of an immediate impact on OPEC. As its oil production has declined, Qatar has become the world’s biggest supplier of LNG; it produces almost 30% of the world total. Development of its North Field, which is shares with Iran, is the country’s top priority, as it should be. Following the news, Brent crude futures have traded higher all morning.
Even if OPEC doesn’t cut production later this week, Canadian producers in Alberta, the country’s production hub, announced an “unprecedented” production cut over the weekend.
But given the recent reports about the discontent with Saudi Arabia’s borderline dictatorial rule over the bloc, the political ramifications of a Gulf producer – particularly Qatar – are difficult to ignore. But in terms of how it might impact the overall production capacity of OPEC, the answer could very well be “minimal”. Because according to media reports, Colombia is reportedly in talks to join the bloc.