Ahead of 175th Ordinary Meeting of the Organization of the Petroleum Exporting Countries (OPEC) taking place tomorrow in Vienna, Qatar has announced that it will end its membership of OPEC effective January 2019.
Minister of Energy H.E Saad Sherida al-Kaabi has said the move was driven by Qatar’s determination to maintain its position as top exporter of liquefied natural gas and dismissed notions that the decision was influenced by tensions with Saudi Arabia.
During tomorrow’s meeting, OPEC members and non-member allies are expected to cut production, spurred by the recent oil price drop below $60 per barrel, despite a high of $86 in October this year.
Qatar and OPEC
OPEC nations hold nearly 82 percent of the world’s oil reserves, with Qatar holding 1.7 percent of the stockpile. A small share, albeit one that has contributed to Qatar’s outsized influence on the world stage via its OPEC membership.
The decision to leave the organization has called into question Qatar’s reputation for putting economic interests above politics. With that, although its exit will have an impact both on OPEC and on the country’s oil sector, it will likely be limited. Qatar joins Gabon and Indonesia in quitting the bloc (Gabon and Indonesia later rejoined, though Indonesia suspended its membership in 2016).
“OPEC produces around 30 to 40 million barrels per day so in terms of production, Qatar is a small part of OPEC, so [this is] not a significant impact,” Spencer Welch, Director of Oil Markets & Downstream, Energy at IHS Markit told DW.
Some reports have received Qatar’s exit as revealing tensions within OPEC, specifically after Al-Kaabi stated: “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,” without mentioning the country.
The blockade on Doha
Despite Al-Kaabi’s claim that the move is not linked to the Saudi-led blockade, which also saw the UAE and Egypt cutting trade and transport ties with Qatar in June 2017, economists have argued that the move is deeply symbolic.
Global Financial Economist at Commerzbank Peter Dixon told The Star Online and Reuters that: “Qatar has been under great pressure from some of its neighbors in the Gulf for some time now. So, it is slightly surprising that it is pulling out and then claiming it is not a political issue. It strikes me that it can only be that.”
The blockade drew the attention of the Trump administration, which has close economic and military ties to all countries involved. During a recent trip to Riyadh, US Secretary of State Mike Pompeo told Saudi Arabia that the United States had had enough of its blockade of Qatar.
For Qatar, leaving OPEC could be a move to gain US support as President Donald Trump exerts pressure on OPEC to keep oil prices low. If production cuts are extended at this week’s meeting, Qatar can improve its strategic relationship with the US and is free to raise its own production without OPEC constraints.
With the loss of Qatar’s 600,000 barrels per day representing less than two percent of OPEC’s total oil production, its departure after 57 years is deeply symbolic, but will likely not have a great impact on OPEC even as Qatar gains more independence over its own oil production. However, as tensions between Qatar and Saudi Arabia deepen, the move does come as a rare example of regional politics taking precedence within OPEC.