Qatar has taken a decision to leave OPEC (Organization of the Petroleum Exporting Countries) from January 1, 2019. Qatar’s Energy Minister, Saad Al-Kaabi said that the decision is dictated by the long-term strategy of Qatar’s international operations. He further added that the country wants to focus on gas extraction and production of liquefied natural gas.
The decision is a consequence of the strategic review of the country, which aims to find new ways of developing the country and increasing the importance of Qatar in the international arena. Qatar is one of the smallest members of OPEC, especially compared to the leader of the oil extraction in the world, Saudi Arabia, which de facto runs the organization. This decision will end Qatar’s membership from OPEC which has stood for more than fifty years.
Saad Al-Kaabi also stressed that this decision is part of Qatar’s technical and strategic strategy, and has nothing to do with the Qatar blockade that has been ongoing since June 2017. Saudi Arabia, United Arab Emirates, Bahrain and Egypt broke diplomatic relations with Qatar, accusing him of, among others, supporting terrorists.
On Monday, Global oil prices surged 5% after China and the US gave their consent o a 90-day truce in a trade dispute. This week OPEC meeting is scheduled and expectations are high to cut supply. Brent crude was up 5.3% at $62 a barrel, lower than October’s peak of more than $86.
Currently, Qatar has a liquefaction capacity of 77mn tons and is aiming expansion plan of 23.4mn tons, based on its huge reserves of the fuel in the Gulf. The operations are expected to start by 2023-end.
Saudi Arabia has an oil output of 11 million barrels per day as compared to 600,000 barrels per day produced by Qatar. Saudi is the world’s biggest exporter of oil. In the OPEC led by Saudi Arabia, the presence of Qatar is not significant, but there is also the possibility that the influence that Qatar has on the global crude oil market may decline due to withdrawal.
OPEC has a large share in the crude oil market and always tries to protect the interests of the producing countries. The organization is trying to gain better revenue by controlling oil prices by affiliate countries to decide on output volumes in discussions.
OPEC has supported the price by reducing crude oil as crude oil prices fall. However, as a result of the emergence of rivals, it is difficult to control the price by cartels, as it will be deprived of market share if it decreases production. If OPEC cuts production, crude oil price will rise and decline if decided to increase production.
OPEC was established in 1960, by oil-producing countries, mainly in the Middle East. It plays a role in adjusting oil production and price for the purpose of protecting the interests of oil-producing countries. It was established as an oil-producing country summit in Iran, Iraq, Saudi Arabia, Kuwait, and Venezuela held in Baghdad.
In order to stabilize the price of oil and adjust production, in the 1970s, prices rose drastically through two oil crises, recaptured crude oil production and pricing right from major companies, and started selling directly. OPEC gained the most significance in 1973-1974 when the increase in oil prices established within this organization led to the global economic crisis.
OPEC members are Algeria, Angola, Venezuela, Gabon, Iran, Iraq, Congo, Kuwait, Qatar, UAE, Nigeria, Saudi Arabia, Equatorial Guinea, and Ecuador. Members of the organization control about two-thirds of the world’s oil reserves, accounting for around 45 % of world mining and half of the exports.