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.