Qatar Pulling out of OPEC Agreement in 2019

By Alexander Trunfio

The Organization of Petroleum Exporting Countries (OPEC for short) was founded in 1960 in order to coordinate and unify petroleum policies of the member countries, as well as to ensure the stabilization of the global oil market. The organization has had a profound impact on the global oil market since it was established, and many of its members have enjoyed the agreement, as it has given the member countries true sovereignty over their natural resources. However, not all members have been totally satisfied with the agreement.

Qatar announced Monday that it would be pulling out of the agreement at the beginning of 2019. Qatar currently produces about 77 million tons of petroleum a year, but would like to increase that number by more than 30 million tons in the future. The country is still considered to be “rich” in oil, but its production has steadily declined over the last few years. In order to meet its “ambitious growth strategy,” Qatar believes it will be necessary for it to exit the agreement.

OPEC’s 15 members supply around 44% of the world’s crude oil, but Qatar is considered a marginal contributor. OPEC produces around 27 million barrels of oil a day, with Qatar contributing about 600,000 of those. Although 600,000 barrels of oil may seem like a large number, it’s almost nothing compared to the 10.5 million that OPEC’s star, Saudi Arabia, produces in one day. Even though Qatar’s withdrawal from OPEC won’t make much of a substantive difference going forward, it has been said to be a disappointment for OPEC, as the organization is attempting to attract new members.

Qatar is the first Middle Eastern country to withdraw from the agreement since it was founded. The withdrawal is not expected to impact global oil prices at all, although global prices have plummeted as of recently, as the US crude futures are trading for around $53 dollars a barrel at the moment. There is no formal withdrawal process for OPEC, although Qatar made it clear that it had informed OPEC of its decision to withdraw from the agreement before making a formal announcement. Although the withdrawal came as a surprise to OPEC and the rest of the world, other countries of OPEC have expressed moderate gratitude towards Qatar for making its intentions official before the annual OPEC meeting in Vienna, which will take place in just three days. It has yet to be seen or even speculated how Qatar’s independence as one of the largest oil producers in the world will impact the oil market and international trade, as well as other international trade agreements, but it will be worth following going forward.

References:

CNN-‘Qatar is pulling out of OPEC to focus on gas’-December 3, 2018, available at

https://www.cnn.com/2018/12/03/business/qatar-opec-withdrawal/index.html

Al Jazeera-‘Qatar to withdraw from OPEC in January 2019’-December 3, 2018, available athttps://www.aljazeera.com/news/2018/12/qatar-withdraw-opec-january-2019-181203061900372.html