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AICEP
Agência para o Investimento e Comércio Externo de Portugal

CABEÇALHO

The decision is more about the Gulf’s troubled politics than oil prices.

QATAR was the first Arab state to join OPEC after its founding in 1960. Now it will be the first Arab state to leave. On December 3rd the emirate’s energy minister, Saad al-Kaabi, said his country was exiting the oil cartel in order to “focus efforts” on gas production. The decision takes effect on January 1st. It will be the first country to leave since 1995, when Gabon withdrew for more than two decades. (Indonesia, which has become a net oil importer, suspended its membership in 2016.)

 

A tiny country of just 2.7m, Qatar is the world’s largest exporter of liquefied natural gas. It is a minor player in oil, though, pumping about 600,000 barrels per day (b/d). Of the 15 OPEC members Qatar ranks eleventh and makes up less than 2% of the cartel’s production. Output has levelled off at its maturing oilfields and spare capacity is limited. Qatar has little use for OPEC, and vice versa.

 

The decision is not really about economics, however. More than half of OPEC’s members are Middle Eastern states that work together despite bitter political feuds. Even Iran and Saudi Arabia manage to find common ground. But the trade and travel embargo imposed on Qatar in June 2017 finally cracked the cartel apart. Two of the four boycotting states are OPEC members, most notably Saudi Arabia.

 

OPEC’s relevance was already on the wane, and the Qataris may hope to accelerate that. OPEC now accounts for just one-third of the world’s 99m b/d in oil production. Last month America and Russia, neither of them OPEC members, both pumped more crude than Saudi Arabia. Oil prices climbed by 2% on December 3rd partly because Alberta, the largest oil-producing province in Canada (another non-OPEC member), decided to cut production by 325,000 b/d.

 

Still, OPEC members (particularly Saudi Arabia) sit on spare capacity that can be brought into use to lower prices. The American president, Donald Trump, asked them to do that in November to offset renewed sanctions on Iran’s oil sector. The Saudis complied, adding another 350,000 b/d to the market. But then America issued generous waivers that allowed eight countries to continue temporarily importing Iranian crude. Prices crashed from $73 per barrel on November 1st to $59 at the end of the month. The Saudis did not know about the waivers and were furious. The kingdom needs oil at $88 per barrel to balance its budget.

 

When OPEC meets on December 6th Saudi Arabia hopes to negotiate production cuts, probably around 500,000 b/d. It is unclear if other members will commit to specific cuts or merely make vague promises. Russia’s break-even price is just $53 per barrel. Its president, Vladimir Putin, said last month that oil prices around $60 were “absolutely fine” for his country.

 

Higher prices also risk angering Mr Trump, Saudi Arabia’s most important ally. He already hates OPEC. “The OPEC monopoly must get prices down now,” he complained in a September tweet, after prices climbed to $78. Some members of Congress are trying to revive the so-called “NOPEC bill”, which would allow America to sue members for collusion. Past presidents promised to veto it. Mr Trump may be less willing.

 

Since the embargo began the Qataris have played a savvy diplomatic game, winning over sceptical members of the Trump administration with promises to curb terrorist financing and expand al-Udeid, America’s main air base in the region. Leaving the cartel shields them from possible lawsuits—and from angry presidential tweets.

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