OPEC is losing one of its oldest members.
The small, gas-rich state of Qatar said Monday that it will leave the oil cartel on January 1 after nearly 60 years. The country’s state oil company, Qatar Petroleum, made the announcement in a series of tweets.
“The withdrawal decision reflects Qatar’s desire to focus its efforts on plans to develop and increase its natural gas production,” Saad Sherida Al-Kaabi, the country’s newly-appointed minister of state for energy affairs, was cited as saying in one of the tweets.
Qatar has been under a diplomatic and economic embargo by its Arab neighbors, including OPEC members Saudi Arabia and the United Arab Emirates, for the past 18 months. In response, Qatar has been increasing gas production, the mainstay of its economy.
OPEC has no role in the global market for natural gas. And Qatar made no reference to the dispute with other Gulf states in its announcement, emphasizing plans to cement its position as the world’s leading supplier of gas. Its exports currently account for about 30% of global demand.
“Achieving our ambitious growth strategy will undoubtedly require focused efforts, commitment and dedication to maintain and strengthen Qatar’s position as the leading natural gas producer,” Al-Kaabi said.
Marginal OPEC producer
Qatar is a marginal player in OPEC when compared to some of the cartel’s biggest producers, such as Saudi Arabia and Iraq. It pumps about 600,000 barrels of oil a day out of more than 27 million from all OPEC members.
But the surprise move comes at a critical time for OPEC. Its members and other major producers are due to meet in Vienna this week to discuss cutting production to boost oil prices.
Concerns about oversupply have sent oil prices plunging. US crude futures hit a four-year high above $76 a barrel in early October. They are now trading at around $53 a barrel.
“The decision by Qatar to withdraw from OPEC does come as a surprise, but is unlikely to have a significant impact on the oil market,” Economist Intelligence Unit analyst Peter Kierna said.
Qatar is the first Middle Eastern country to pull out of OPEC, which was founded in 1960. Other countries have come and gone — Indonesia left in 2009 before rejoining for less than a year in 2016. Gabon rejoined in 2016 after an absence of more than 20 years.
A setback for OPEC
“It’s a disappointment for OPEC because they’ve been trying to attract members,” said Robin Mills, CEO of Qamar Energy, a consultancy firm based in Dubai.
OPEC has recently been expanding in Africa, with Congo and Equatorial Guinea signing up.
“If you add those up, [the production] is equal to Qatar’s so it’s kind of lost the equivalent [output] of those new members,” Mills added.
The 15 OPEC members collectively supply about 44% of the world’s crude oil. The cartel aims to monitor the market and decide to raise or lower oil production in order to maintain stable prices and supply.
Qatar has been a member of OPEC since 1961. It said the organization was aware of its decision to withdraw.