Qatar quits OPEC – opinion

“The decision by Qatar to quit OPEC is certainly a surprise, although it is more the timing of the announcement rather than the actual impact on OPEC supply that bears significance. Qatar is a tiny oil producer – accounting for less than 2% of the cartels output – but it is one of the world’s largest LNG producers, and as such membership of OPEC doesn’t really deliver the benefits that it does to other member nations.

Furthermore, the longstanding Saudi-led economic and political boycott of Qatar is bound to have played a large part in the decision. We don’t think it makes much of a difference to the ability of OPEC to influence global supply (and ergo prices), as it is only the support of Russia that allows the cartel to maintain its current relevance. 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 US has over Saudi Arabia, and whether this leads to decisions that are not necessarily in the best interests of OPEC.

We are of the view that this will have 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.”

Read the article online at: https://www.oilfieldtechnology.com/special-reports/03122018/qatar-quits-opec-opinion/