Qatar is to pull out of Opec after nearly 60 years of membership of the oil cartel, but will attend a meeting this week that will discuss cutting output.
Saad al-Kaabi, the country’s energy minister, told a news conference: “Qatar has decided to withdraw its membership from Opec effective January 2019 and this decision was communicated to Opec this morning.”
He said the decision was not linked to a political and economic boycott of Qatar imposed in June 2017 by Saudi Arabia, Opec’s largest member and its de facto leader, and three other Arab states – the United Arab Emirates, Bahrain and Egypt. They imposed a trade and travel embargo on Qatar over allegations that it supports terrorism. Doha denies the charges.
Qatar is one of the cartel’s smallest oil producers, but is the world’s largest exporter of liquefied natural gas. Al-Kaabi said the gulf state had reviewed ways to enhance its role internationally, including focusing on its gas industry. Qatar wants to ramp up liquefied natural gas production from 77m to 110m tonnes a year.
He added that Qatar would still attend the Opec meeting in Vienna that starts on Thursday and will set oil policy for next year.
Opec members are widely expected to cut production, after the oil price tumbled this autumn. Brent crude slid to below $60 a barrel last week, from $86 in October, while US crude fell below $50 a barrel. However, oil prices surged on Monday after the US and China agreed a 90-day truce in their trade war at a weekend meeting of the G20 nations in Argentina.
Founded in 1960, the cartel of the world’s biggest oil producers emerged as a political and economic force with the 1973-74 US oil embargo, which caused oil prices to spike. The club consists of 13 countries, with Saudi Arabia the biggest producer, followed by Iraq and Iran.
In response to the 2014-16 oil price slump, Opec partnered with Russia in December 2016 to agree a cut in production of 1.8m barrels a day. That curb, the first of its kind in 15 years, drove up the price of oil. In May 2017, the cuts were extended until the end of March 2018.
Opec's official members are: Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela. Indonesia and Qatar's membership has lapsed.
The Opec+ group, sometimes known as "Vienna Group", adds 10 non-member nations, including Kazakhstan, Mexico and Russia. Between them these nations supply 55% of oil production and hold 90% of the planet's oil reserves.
The price of Brent crude jumped 4.7% to $62.24 in early trading, while US crude was also up about 5%. BP’s share price rose 4% and Shell was up 3.5%. Mining stocks are also surging.
Qatar’s energy minister said the decision to withdraw had not been easy after 57 years of Opec membership, but noted that the country’s impact on the cartel’s production decisions was small. He stressed that Doha would abide by its global commitments like any other non-Opec oil producer.
Qatar pumps about 600,000 barrels a day, while Saudi Arabia, the world’s biggest exporter, produces 11m barrels. The emirate’s withdrawal comes as other non-Opec countries such as Russia have gained more clout alongside Saudi Arabia in setting oil policy.
Al-Kaabi stressed the move was a “strategy decision”. “We will make a big splash in the oil and gas business soon,” he said. Doha plans to build the largest ethane cracker in the Middle East. Ethane crackers break gas down into ethylene, the main chemical used in plastics, resins, adhesives and synthetic products.
Naeem Aslam, an analyst at online broker ThinkMarkets, said: “Qatar leaving Opec isn’t great news for the oil market and the market participants haven’t digested the full impact of this news. Basically, Qataris have brought the biggest weapon out and it only means more instability between the Qatari and Saudi relationship.
“In fact, we would not be surprised if other counties start to follow the same path and then we have no control over supply or demand as each individual country could just do what they like. Yes, for now, there is optimism that Saudi Arabia and Russia are committed to keep the supply under control. This has jolted the price of oil higher especially the fact that Canada’s largest oil-producing province is curbing the output.”
