Qatar's New Year exit from Opec to leave oil markets undisturbed, analysts say
Brent is set to enter 2019 below $54 per barrel and is expected to trend lower amid surging US supply
Qatar’s exit from Opec on January 1 is unlikely to have any impact on the oil markets, say analysts, even as the price of Brent trends lower compared with its surge only two months ago.
"I don’t think it’s going to have an immediate impact. Qatar doesn’t have room to increase production very much, if at all. They weren’t really being constrained by Opec on the production side,” said Robin Mills, chief executive at Qamar Energy.
"The difference is that if they’re still part of the non-Opec group, they might still co-operate on that and even if they do, they’ll cut 1,000 barrels at most so this won’t have an impact,” he added.
Qatar, which joined Opec in 1961, announced its exit from the group ahead of its annual meeting in Vienna in December citing increased priority towards developing its gas resources. Doha has the world’s third largest reserves of gas - around 12.9 per cent of world total - and was the largest producer of liquefied natural gas until December, when it was overtaken by Australia.
Qatar’s production of oil and contribution to production cuts has been of little significance, however. The country, the smallest Middle Eastern producer in the group, had production averaging 615,000 barrels per day in November, according to Opec secondary sources.
"Whilst unexpected, Qatar leaving Opec is no material game changer for oil markets, with the move being largely symbolic given the country is a negligible member of the cartel,” said Ehsan Khoman, head of MENA research and strategy at MUFG Bank.
"In purely mathematical terms, Qatar is Opec's fifth smallest producer (out of 15 members), and constitutes only 1.8 per cent of Opec's 33.3 million bpd output,” he added.
The group’s pact to cut production along with sovereign producer allies led by Russia to the tune of 1.2 million bpd starting January is “unlikely to be impacted over the short and medium term,” he noted.
The price of Brent, which is set to enter the new year at $53.41 per barrel after falling dramatically from a high of $86.29 per barrel in October, has seen its worst annual performance in three years after declining 19 per cent over the course of 2018.
Brent is expected to perform dismally for the first half of the year, said Mr Mills, who noted that the benchmark is likely to trend even lower until the renewal of Iranian sanction waivers in April.
"I think later towards the year, around April, May when Iran sanctions intensify, we might see prices picking up again and US prices slowing down,” he said.
“The cuts will take a while, a few months for them to have that effect to bring the market back to balance again,” he added.
Updated: December 31, 2018 03:54 PM