Qatar’s exit from OPEC will have ‘no major impact’ on oil prices

A liquid natural gas tanker being loaded in northern Qatar. The Arab nation, which has been under a trade embargo by a group of Arab states, announced on Monday that it would switch its focus to gas production. (AP Photo)
Updated 04 December 2018
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Qatar’s exit from OPEC will have ‘no major impact’ on oil prices

  • Qatar produces around 600,000 barrels of crude oil per day compared with the near 10 million barrels a day produced by Saudi Arabia
  • Qatar is the 11th-largest producer out of 15 members in OPEC and accounts for less than 2 percent of the oil group’s output

LONDON: Qatar’s decision to exit OPEC next month is unlikely to have a significant impact on the oil group’s structure or on short-term oil prices, according to analysts.
The Gulf country announced on Monday it would leave OPEC from Jan. 1 2019. It plans to attend the next meeting of the group due to take place in Vienna on Dec. 6.
The move is viewed as “symbolic” and reflects deepening regional divisions, market commentators said. Qatar has been under a trade embargo imposed by a Saudi Arabia-led group of Arab states since last June, following accusations that the country was fueling regional instability and funding terrorism.
“Qatar’s decision to exit OPEC will have no major impact on the cartel’s decision-making process, oil output or oil prices in the short term,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.
“Qatar is one of OPEC’s smallest oil producers, and its upstream strategy has revolved around natural gas production,” he said.

 

Qatar produces around 600,000 barrels of crude oil per day compared with the near 10 million barrels a day produced by Saudi Arabia, according to data from 2017. Qatar is the 11th-largest producer out of 15 members in OPEC and accounts for less than 2 percent of the oil group’s output.
“The move is highly symbolic — Qatar has been a member of OPEC since 1961. But we doubt that it will have a major bearing on global energy markets,” read a note from Jason Tuvey, senior emerging markets economist at Capital Economics on Monday.
Rejecting suggestions the decision was politically motivated, Qatar’s energy ministry said on Monday that it wanted to focus more on gas production.
“In the next few months we will be announcing several major projects. Our goal in this strategy was to remain focused on our core business and activities to enhance Qatar’s international standing as the world’s leading natural gas producer,” the ministry said.
Analysts said that the departure could have implications for regional politics. “Although Qatar has dismissed suggestions that its exit from OPEC was driven by geopolitics, the move could deepen tensions in the Middle East,” said Kumar.
“Qatar leaving OPEC can be seen as Saudis consolidating their influence within the cartel. Meanwhile, Iran’s economy is set to face further headwinds because of sanctions imposed by the US, which has the potential to ratchet up tensions in the Middle East,” he said.
Ehsan Khoman, head of MENA research and strategy at MUFG, based in Dubai, questioned the timing of the exit and suggested Qatar might look to increase oil production just as the oil cartel is due to cut production.
“More importantly is the timing of Qatar’s withdrawal — just three days before OPEC meets in Vienna to finalize the production cuts. This suggests that Qatar may have an agenda to raise production while others in OPEC are curbing production, although Qatar’s oil output has been steady in recent years with limited prospects of increases — given maturing fields,” he said in a research note.
OPEC is due to announce cuts to oil production this week in Vienna in an effort to stabilize the market and counter a potential glut in supply. This could push up Brent oil prices to the mid-$60 per barrel level, Khoman said.
Qatar’s economy has been fairly resilient in the face of the embargo, said analysts. “The economy has defied the expectations of some analysts that the blockade would lead to recession,” said Tuvey.

FASTFACTS

Qatar has been a member of OPEC since 1961.


Samsung shares rise as Huawei struggles

Updated 34 min 20 sec ago
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Samsung shares rise as Huawei struggles

  • Huawei has been rocked with promblems in the past weeks, including major revelations from tech giants
  • Samsung is the world’s biggest smartphone maker which has been facing increasing competition from its Chinese rival

SEOUL: Shares in Samsung Electronics climbed nearly three percent Tuesday on the back of its chief rival Huawei’s mounting problems, including a decision by Google to sever ties with the Chinese mobile phone maker.
It is the latest in the months-long saga between Huawei and the United States analysts warn could see Chinese semiconductor demand fall, threatening a nascent Asian recovery in the industry.
US Internet giant Google, whose Android mobile operating system powers most of the world’s smartphones, said this week it is cutting ties with Huawei to comply with an executive order issued by President Donald Trump.
The move could have dramatic implications for Huawei smartphone users, as the firm will no longer have access to Google’s proprietary services — which include the Gmail and Google Maps apps.
Investors bet Huawei’s loss could benefit Samsung, the world’s biggest smartphone maker which has been facing increasing competition from its Chinese rival, sending its shares up 2.7 percent at closing on Tuesday.
Analysts say the US ban will damage Huawei’s ability to sell phones outside China, offering Samsung a chance to consolidate its position at the top of the global market.
“If you are in Europe or China and couldn’t use Google map or any Android services with a Huawei smartphone, would you buy one?” MS Hwang, an analyst at Samsung Securities, told Bloomberg News, adding: “Wouldn’t you buy a Samsung smartphone instead?“
Samsung accounted for 23.1 percent of global smartphone sales in the first quarter of this year, according to industry tracker International Data Corporation, while Huawei had 19.0 percent.
But Huawei’s troubles may be a double-edged sword for Samsung — also the world’s biggest chipmaker — if it leads to a plunge in demand for semiconductors.
China dominates purchases from Asian chip makers and bought 51 percent of their shipments in 2017, Bloomberg reported citing a Citigroup analysis. Including Hong Kong, it accounted for 69 percent of South Korea’s chip production.
“In our view, China’s restocking efforts for electronic goods will likely weaken and be delayed if the tensions and the ban stay longer, which likely will hurt overall demand,” the report said.
Last week, Trump declared a “national emergency” empowering him to blacklist companies seen as “an unacceptable risk to the national security of the United States” — a move analysts said was clearly aimed at Huawei.
The US Commerce Department announced a ban on American companies selling or transferring US technology to Huawei, with a 90-day reprieve by allowing temporary licenses.