Story Of The Week

Qataexit : What comes along ?

“It signals OPEC’s lack of unity, even within the Saudi-Russian axis, which could spur greater volatility in oil markets.”

Recently Qatar declared its withdrawal from membership with OPEC with effective from January 1, 2019. Qatar is the largest natural gas exporter in the world has a relationship of 57 years with OPEC. Area wise it is smallest among all the countries and the share of Qatar in total oil production among OPEC countries is minimal i.e. just 2%.However, the matter of concern presently is to figure out the factors that led the First Energy rich Gulf state to quit from OPEC. How this exit will impact the volatility in the oilmarket and what perception does this withdrawal builds about OPEC in the world. Inthis article let’s further delve into the inside story of the “Qataexit”.

Why ?

Saad Sherida al-Kaabi, Qatar’s minister of state for energy affairs and president and CEO of Qatar Petroleum, said that Qatar’s exit from OPEC “is not political, it was a pure business decision for Qatar’s future strategy towards the energy sector”. The countrywants to focus on its gas ambitions. Doha is the largest Liquefied Natural Gas exporter in the world and it now wants to focus more on this part rather than wasting time, efforts and resources on an organization that they are a very small player in and do not have a say in decision making. However, the actual facto behind the exit is the increasing influence of Saudi in the OPEC and its high interference in decision making. The OPEC has seen high dominance of Saudi Arabia, Russia, and the United States over policymaking in the oil market as they export more than a third of global output. Riyadh and Moscow are keen on deciding the output policies together under the pressure of US President Donald Trump on OPEC to cut down on oil prices. Also in June 2017, Saudi Arabia enacted economic and political boycott against Qatar over the allegations of Doha supporting terrorism and it’s regional rival Iran. The aforementioned factors along with the dominance of Saudi Arabia in OPEC and influence of Russia and US on major decisions is making other members of the organization feel alienated. Qatar under the hue of following factors announced its withdrawal from organization

Impact

“It could signal a historic turning point of the organisation towards Russia, Saudi Arabiaand the United States,” said Algeria’s former energy minister and OPEC chairman,Chakib Khelil, commenting on Qatar’s moveDoha’s exit is expected to pose a psychological impact on the other members of OPEC with these members following the same lines to protest against the unilateral decisionmaking by Saudi Arabia in recent pasts. The Qataexit may not be a major issue when seen in terms of the output as it has oil output of just 600,000 barrels per day (bpd), compared with Saudi Arabia’s 11 million bpd. Also, no major impact on oil prices are expected to be seen. But the perception that it has built in the world is lack of unity and increased instability in OPEC. Also, analysts on seeing the present situation of the small Gulf country believe that Qatar is on course to produce more than 6 million barrels of oil equivalent by 2022. This is a major supply to the world and may prove to be a significant contribution to OPEC.Further Qatar’s has shown in past a tactful approach to negotiating energy policy with regional rivals. The country had often acted as a “diplomatic bridge” in the MiddleEast-dominated group. For Qatar, this may be a meticulous decision when seen through the lens of its long-term economic vision and its divergence from oil cartel’s business trajectory. The country can now sway away from unnecessary interventions and compulsions and focus on its niche and core business which is gas production and export. Analysts believe that the exit of Qatar can have implications on regional politics and could deepen tensions in the Middle East.

Conclusion

This step by the Gulf country is said to be a strategic decision by the officials but it more seems to be politically driven. Also, there may be a hidden agenda behind the same, one of them being speculated is Qatar may want to increase the oil production while the OPEC decided to cut down the production in the meeting held in Vienna. There will not be a significant change in price and quantity of oil in the market, but the geopolitics in the middle east may take a different shape.

References

  • www.ft.com/content/f33b64de-f710-11e8-8b7c-6fa24bd5409c
  • https://theowp.org/the-gulf-cooperation-council-fades-as-the-qatari-blockade-backfires/
  • http://northamericanshalemagazine.com/articles/2577/the-impact-of-qatarundefineds-exit-from-opec
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