Qatar’s OPEC with­drawal raises con­cerns over global oil pol­icy-mak­ing

Global Times US Edition - - ASIANREVIEW - By Ma Qian, Wang Naishui and Liu Yanan The au­thors are writ­ers with the Xin­hua News Agency. The ar­ti­cle first ap­peared on Xin­hua. opin­[email protected]­al­times.com.cn

Qatar’s Mon­day an­nounce­ment to with­draw from the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries (OPEC) sparked in­vestors’ con­cerns over more volatile pol­icy-mak­ing in the global oil mar­ket, amid per­sis­tent fears of over­sup­ply and shrink­ing de­mand seen in con­stant price slides over the last two months.

“The high volatil­ity and large down move of the last 60 days will have a last­ing im­pact on trad­ing go­ing into first quar­ter of 2019,” said Al­bert Helmig, CEO of Grey House, a pri­vate con­sult­ing firm fo­cused on mar­ket struc­ture, risk man­age­ment and price mod­els.

Qatar’s de­ci­sion to end its 57-year mem­ber­ship in the oil car­tel on Jan­uary 1, 2019 came three days ahead of a meet­ing be­tween the Saudi-led OPEC and its al­lies to re­shape global oil pol­icy to grap­ple with broad price drops.

Qatar’s Min­is­ter of En­ergy Saad al-Kaabi told me­dia that Doha would still at­tend OPEC’s up­com­ing meet­ing on Thurs­day and Fri­day in Vi­enna.

“We are not say­ing we are go­ing to get out of the oil busi­ness, but it is con­trolled by an or­ga­ni­za­tion man­aged by a coun­try,” said al-Kaabi.

Al-Kaabi added that it would not be prac­ti­cal for Doha to “put ef­fort and re­sources and time in an or­ga­ni­za­tion” in which Qatar was “a very small player, and didn’t have a real say in what hap­pens.”

The de­ci­sion “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,” said Ann-Louise Hit­tle, head of Macro Oils at Wood Mackenzie, an Ed­in­burgh­based global en­ergy re­search and con­sul­tancy firm, in a press re­lease.

Hit­tle also pointed out that as the smaller na­tions of OPEC have a rel­a­tively pas­sive role in the group’s de­ci­sion-mak­ing, “Qatar may also see that it has less to gain from its mem­ber­ship.”

The move ex­posed the deep­en­ing rift be­tween Qatar and its Gulf neigh­bors since June 2017, when Saudi Ara­bia, the United Arab Emi­rates and oth­ers sev­ered diplo­matic ties with Qatar.

Doha’s quit­ting OPEC con­se­quently gave rise to con­cerns that Saudi Ara­bia, Rus­sia and the United States, the world’s top three oil pro­duc­ers, would gain more con­trol over global oil pol­icy-mak­ing, as geopol­i­tics has been one of the main driv­ers be­hind oil prices.

Rus­sia has re­cently shown its will­ing­ness to co­op­er­ate with OPEC in a po­ten­tial oil out­put cut in the face of US calls for a fur­ther pull­back in oil prices. In­vestors had wor­ried that Saudi Ara­bia would avoid con­fronting the United States over oil prices.

“Prior OPEC-Rus­sian ef­forts to cut pro­duc­tion were ef­fec­tive for as long as a year, but ul­ti­mately the re­sult is loss of mar­ket share to the United States and a re­turn to low prices,” said Chris Low, chief economist at US se­cu­ri­ties bro­ker firm FTN Fi­nan­cial, in a note to me­dia.

Helmig said that de­spite in­vestors’ an­tic­i­pa­tion of an OPEC an­nounce­ment of a pro­duc­tion cut, the mar­ket has been very cau­tious and “await­ing more de­tails of size and tim­ing of a pro­duc­tion change.”

An­a­lysts said Qatar’s de­ci­sion would not have a sig­nif­i­cant im­pact on oil prices as its pro­duc­tion ac­counts for only 2 per­cent of OPEC’s to­tal out­put. Yet the small­est Mid­dle East oil pro­ducer in OPEC is cur­rently the world’s big­gest liq­ue­fied nat­u­ral gas (LNG) ex­porter.

Saad al-Kaabi said that his coun­try plans to in­crease LNG out­put to 110 mil­lion tons per year by 2024, call­ing Doha’s with­drawal de­ci­sion part of a long-term strat­egy.

En­ergy mar­ket watch­ers be­lieve that Doha’s lat­est move in­di­cated that the small Gulf na­tion is seek­ing dom­i­nance in the global LNG mar­ket.

“Qatar’s OPEC exit un­der­lines the coun­try’s aim to main­tain its place in the global LNG mar­ket,” said Lynn Mor­risAkinyemi, a re­search an­a­lyst at Wood Mackenzie.

Helmig also said the de­ci­sion made sense given the volatile na­ture of global geopol­i­tics. “Within the com­plex geopol­i­tics in­side OPEC and the focus on oil, the Qatari po­si­tion is not a sur­prise. Their stated po­si­tion is to focus on ex­pand­ing their LNG portfolio.”

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