Qatar to leave OPEC as cartel pressured to cut production
The nation, which has played key role inside the cartel, to focus on boosting natural gas
Qatar said it plans to leave OPEC after nearly six decades, a move seen as seeking to curry favor with the Trump administration and spurning neighboring Saudi Arabia.
The decision by the Persian Gulf emirate—which is locked in an 18-month diplomatic standoff with Saudi Arabia, the cartel’s kingpin—comes as OPEC faces strong headwinds. The cartel is struggling to craft an effective response to falling prices and under pressure from Washington to keep them low.
The move could buy U.S. goodwill. The Qataris gave little advance notice of their exit to OPEC, but alerted U.S. officials ahead of the announcement, which came just days before the cartel is scheduled to meet, according to Qatari and OPEC officials and a former Trump administration official.
President Trump has criticized the group for increasing prices and threatened to support antitrust legislation against OPEC. The decision “will please Trump as it undermines OPEC,” said an official with an OPEC member country.
Qatar is one of the smaller oil producers in the Organization of the Petroleum Exporting Countries, but it is a powerhouse in the natural gas market. It said Monday that its decision to leave the cartel is part of an effort to focus on its position as a leading producer of liquefied natural gas.
“[Leaving OPEC] is a political move that serves us also economically,” said a Qatari official.
The emirate has long played a central part in Middle East politics. Qatar’s relationship with Washington includes its role hosting a major U.S. air base. At the same time, Qatar and Iran also jointly manage the world’s largest natural gas field.
Qatar also historically aligned itself with a Saudi-led group of Gulf monarchies, and has been a member of OPEC since 1961, a year after its creation. But Saudi Arabia and others in the region imposed an economic and political boycott on Qatar last year, alleging it finances terrorism— which Qatar has denied.
Saudi Arabia recently signalled its hardline position toward Qatar may be softening in the aftermath of the October killing of dissident journalist Jamal Khashoggi by Saudi operatives in Istanbul, which triggered global outrage. Saudi Crown Prince Mohammed bin Salman praised the Qatari economy at an investment conference in October, a remark the Saudi Ministry of Information said was aimed at delivering “a powerful message on regional unity.”
The U.S., which had worried that the emirate was drifting into Iran’s political and economic orbit, sought to leverage its influence to pressure Saudi Arabia into easing the blockade on Qatar after the killing of Mr. Khashoggi, according to U.S. and Saudi officials.
Still, Qatari officials say the countries are no closer to resolving their differences and claim there has been no direct contact with Saudi officials.
The timing of the decision to leave OPEC, where non-member Russia has also been playing a larger role, sends a clear signal that the country no longer needs the cartel, said the Qatari official.
“We don’t need OPEC or Riyadh or Russia to tell us what should or should not be done in the market,” the official said.
Other ties have been fraying within the 15-nation group, too. Iran has criticized OPEC’s decision to boost production ahead of U.S. sanctions on Iranian oil that came into force last month.
In recent years, an OPEC alliance with Russia has left some smaller oil-producing nations feeling as if their positions in the cartel are less meaningful, as Saudi Arabia and Moscow influence policy.
Qatar produces about 600,000 barrels of crude a day, a fraction of Saudi output, making its impact on the group’s market share limited.
Qatar’s absence is unlikely to have a material effect on OPEC’s goal of reducing output next year, said Ann-Louise Hittle, vice president at consulting firm Wood Mackenzie. “However, it does come at a time when OPEC needs to hammer out a deal in the face of market skepticism in the cartel’s ability to control production,” she said.
Some delegates, who are coming to Vienna for this week’s gathering, worried about a domino effect. “This will undermine OPEC in the long term,” said a senior Gulf-region OPEC official. “It may make some producers rethink, why do we really need OPEC? And the market will also raise the same question,” he said. Qatar’s departure will also undermine the group’s “convening power,” said Helima Croft, the chief commodities strategist at Canadian broker RBC. “It is one of the only remaining forums where countries that have serious... strategic disputes meet and discuss issues that are of mutual economic interest,” she said.
There are already signs that Saudi Arabia has begun contemplating a world without the cartel. The Wall Street Journal reported last month that Saudi Arabia is studying how a possible breakup of OPEC might affect oil markets, a remarkable effort for a country that has dominated the cartel for its nearly 60-year existence.
Oil prices rallied on Monday, with Brent crude, the global benchmark, rising 3.8% to $61.69 (U.S.) a barrel. This past weekend Russia and Saudi Arabia agreed to extend efforts by OPEC to rebalance markets. The recovery follows the sharpest monthly slide for oil prices since October 2008, with U.S. crude and Brent each falling 22% last month.