- Qatar announced on Monday it was leaving the Organization of the Petroleum Exporting Countries(OPEC), the world’s leading oil producing bloc.
- The Gulf state, which has been a member of OPEC since 1961, said it wanted to focus more on the production of Liquefied Natural Gas(LNG). Qatar supplied about 2 percent of annual OPEC output.
- The decision comes days ahead of a scheduled meeting of the oil bloc in Vienna, Austria and amid tension with leading OPEC member Saudi Arabia, which has imposed a land and air blockade on Qatar since 2017.
- Qatar’s Energy Minister SaadSherida al-Kaabi, however, said that it was purely a business decision
What is OPEC?
- OPEC was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, five major oil-producing countries.
- According to OPEC’s website, its goal is “to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilisation of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry”
- In reality, OPEC is one of the most powerful players in the global supply of oil, as the organisation produces more than a third of global oil supply.
On a day-to-day basis, OPEC countries produce about 32 million barrels of oil per day, giving the organisation significant influence over both the number of barrels produced per day and the oil price as a whole.
By increasing or reducing oil production, OPEC controls oil supply, which means it can increase or reduce the price of oil.
This happened in early December when OPEC and Russia – not a member of OPEC – said they would cut oil supply to ensure prices did not drop too much in the coming year, as both Russia and many OPEC countries heavily rely on oil exports for their economy.
But Saudi Arabia, the largest contributor to OPEC’s oil output, is considered the de facto leader of the organisation.
Others view with respect to Qatar’s exit:
- Qatar’s Energy Minister, SaadSherida al-Kaabi, dismissed the notion that the decision was driven by Doha’s ongoing feud with OPEC’s de facto leader Saudi Arabia. Riyadh has led a land, sea, and air blockade against the Qatar since June 2017.
- Nevertheless, some analysts see Doha’s break with cartel as deeply symbolic, especially given the fact OPEC has in the past overcome major divisions to coordinate energy policy.
- “More than anything, we suspect that Qatar’s withdrawal from OPEC has been spurred by its ongoing dispute with Saudi Arabia and its allies,” Jason Tuvey, Capital Economics senior emerging markets economist, wrote in a note to clients.
- Amy Myers Jaffe, senior fellow at the Council on Foreign Relations, said Qatar’s decision underscores how the the blockade has added urgency to Doha’s slow drift from Riyadh’s sphere of influence.