QATAR’S EXIT
Gulf country announces surprise decision to leave the Organization of the Petroleum Exporting Countries,
Qatar said it plans to leave the Organization of the Petroleum Exporting Countries, a surprise decision for a member that has long played a key role inside the cartel, but has more recently clashed with de facto leader Saudi Arabia.
Qatar is a small oil producer, but has in recent decades become a natural gas giant. Monday, ahead of a planned meeting of OPEC later this week, it said it was leaving the group to concentrate on boosting its gas production. The move comes as the cartel is struggling with a response to falling oil prices, and pressure from the U.S. to keep them low.
Qatar Energy Minister Saad al-Kaabi said the country would withdraw from the organization by January 2019 at a press conference Monday, state-run company Qatar Petroleum said on its Twitter account. An OPEC official in Vienna confirmed it was aware of the decision.
The move “reflects Qatar’s desire to focus its efforts on plans to develop and increase its natural gas production from 77 million tons per year to 110 million tons in the coming years,” he was quoted as saying.
Qatar’s withdrawal means OPEC will lose a key diplomatic go-between. Though it has historically aligned itself with a Saudi-led group of Gulf monarchies that sought moderate oil prices, the Emirate has also worked to mend fences between the faction and hard-liners such as Iran and Venezuela.
Qatar spearheaded an attempt to freeze oil output in April 2016 at a Doha summit. That effort collapsed when Saudi Crown Prince Mohammed bin Salman ordered the kingdom’s delegation to pull out of the production deal. The turnaround left Qatar frustrated with what turned out to be the de facto Saudi ruler’s increasing interference in OPEC, a Qatar official said subsequently.
The withdrawal comes as Doha has faced an economic blockade from OPEC’s kingpin and neighbor Saudi Arabia over allegations it finances terrorism—which it has denied. Mr. Kaabi said the withdrawal wasn’t connected to the Saudi restrictions, according to Reuters. Qatar has been unhappy about what it perceives is meddling of Prince Salman in OPEC affairs, a Qatari official has previously said. It also sees little benefit from cutting production when prices are low, that official also said previously.
Qatar is one of OPEC’s smallest producers, with an output of about 600,000 barrels a day, making its impact on the group’s market share limited. But while members such as Indonesia have left in the past, the Emirate is one of the group’s oldest participants, having joined OPEC in 1961, one year after its creation.
But Qatar’s pullout after 57 years also comes as the organization is facing significant headwinds. President Trump has criticized the group for increasing prices and threatened to support antitrust legislation against OPEC. A Saudi think tank also recently looked into the group’s future if Saudi Arabia was to pullout from the group and Iran has criticized OPEC’s decision to replace its oil ahead of returning U.S. sanctions.
“This is a political move that serves us also economically,” said a Qatari official. “We don’t need OPEC or Riyadh or Russia to tell us what should or should not be done in the market.” He said the timing of Qatar’s announcement ahead of the coming OPEC summit sends a clear signal that the country no longer needs the cartel. The official noted that Qatar has capacity to produce 800,000 barrels of oil a day, but he said Qatar is banking its future on natural gas.
Oil prices rallied on Monday, with Brent crude, the global benchmark, rising 4.2% to $61.94 (U.S.) a barrel. This past weekend Russia and Saudi Arabia agreed to extend efforts by OPEC. The recovery follows the sharpest monthly slide for oil prices since October 2008, with U.S. crude and Brent each falling 22% last month.