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.


India names Modi demonetization backer as cenbank head

Visitors are seen standing next to a logo of the Reserve Bank of India (RBI) at the bank's head office in Mumbai on December 5, 2018. (AFP)
Updated 12 December 2018
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India names Modi demonetization backer as cenbank head

  • Das — a high-profile backer of Modi’s controversial 2016 move to scrap high-value currency notes, known as demonetization

MUMBAI: Ex-finance ministry official Shaktikanta Das took charge of the Reserve Bank of India on Tuesday, in a swift appointment expected to ease a dispute with the government as it pushes for looser credit rules ahead of a general election.
The announcement by Prime Minister Narendra Modi’s administration came just a day after Urjit Patel resigned from the post, following months of clashes between the two institutions over lending curbs and how to deploy the central bank’s surplus reserves.
Pressure on the RBI to take immediate steps to boost the economy, including a transfer of the excess reserves to the government, could well rise after Modi’s ruling Bharatiya Janata Party (BJP) suffered likely election losses in three key states on Tuesday.
Das — a high-profile backer of Modi’s controversial 2016 move to scrap high-value currency notes, known as demonetization — will serve a three-year term as governor, effective immediately.
RBI watchers said they expected the 61-year-old, who retired last year as secretary of the department of economic affairs having previously served on the RBI’s board, to put relations between the Mumbai-based bank and the finance ministry in New Delhi on a stabler footing.
Investors will also look closely at his ability to hold up against outside influences after recent efforts by the Modi government to gain greater control over the central bank’s regulatory powers.
“The incoming governor will have to work hard to prove that he has his own independent mind,” said Deepak Jasani, head of retail research at Hdfc Securities.
Investors said any openly political appointee with little macro-economic experience, would not sit well with financial markets that already sold off following the BJP’s election setbacks.
But Ashish Vaidya, executive director and head of trading at DBS Bank in Mumbai, said he expected India’s debt and currency markets to react positively.
“He is a bureaucrat...We expect the RBI to take a pragmatic approach under him, be pro-growth and change its stance going ahead given that inflation has come off sharply,” he said.
Finance Minister Arun Jaitley told Reuters partner ANI that the government acknowledged the bank’s independence.
“Government will fully support the RBI and coordinate with it in areas where consultations of government are required to make sure India’s economy benefits from both government policy decisions and areas which fall within domain of the RBI,” ANI tweeted, quoting Jaitley.

SWIFT APPOINTMENT
Pronab Sen, India’s former chief statistician, said he was surprised by the speed of Das’s appointment.
“If you have a situation where a position as important as the governor of the RBI is filled within 24 hours of the resignation of the incumbent, that will raise eyebrows,” Sen told Reuters.
“People are going to say, clearly this guy had already been identified. And, the situation was created where Urjit Patel had to quit.”
Das — widely seen as a contender for the top RBI job after Raghuram Rajan’s term ended in 2016 — did not answer calls from Reuters to his mobile phone.
RBI officials who have worked with him closely said Das was likely to be more inclusive in the decision-making process than Patel.
“He has a balanced approach and is good at consensus building,” said a former deputy governor. .”..We have had our fair share of differences. But he has always been solution-centric rather than festering on those differences.”
Das worked in the finance ministry under both Modi’s government and the previous coalition led by the main opposition Congress party and was also involved in drafting the Insolvency and Bankruptcy code aimed at protecting small investors.
He came under fire for his pro-demonetization stance and was the most vocal bureaucrat at the time Modi withdrew the high-value bank notes to fight tax evasion.
Das last year criticized the methodology of global rating agencies and sought a sovereign rating upgrade for India.