OPEC to cut, but how much?

OPEC to cut, but how much?

The surprising move by Qatar may spur country's like Nigeria, ninth largest exporter, to value their gas more and define a set of finance terms aimed at getting extra value from the natural resource.

The tiny, energy-rich Arab nation of Qatar announced Monday it will withdraw from OPEC in January, a rebuke of the Saudi-dominated cartel as the kingdom's boycott of Doha continues unabated and a crucial meeting of the group looms this week.

Qatar announced that it had informed OPEC on Monday of its decision to withdraw from the organization effective from January 2019, with economic observers estimating limited impact on the wider group in the long-run.

Qatar is among the smallest oil producers in the group, pumping 609,000 barrels a day - two per cent of OPEC's total - compared with more than ten million barrels produced by Saudi Arabia or the three million produced by the United Arab Emirates.

"In our base case, we expect the elegant solution that would exclude Iran and Venezuela from the cuts and allow Saudi Arabia and the other flexible producers to cut output in line with the individual country allocations".

Qatar has been a member of OPEC since 1961, and the decision to pull out comes at a turbulent time in Gulf politics, with Doha under a boycott by former neighbouring allies including Saudi Arabia for 18 months.

The decision was announced on Monday by the country's Energy Minister, Saad al-Kaabi.

Qatar was the first country to join OPEC's five founding members 57 years ago.

After a 30% drop since October, crude prices had a respite with 5% surge Monday following positive news that Russian Federation and Saudi Arabia had agreed to cut production and that the USA and China had reached a 90-day trade-war truce. With these factors together, the nation is cutting ties with OPEC.

US light crude oil rose $2.92 a barrel to a high of $53.85, up 5.7 percent, before easing slightly to around $53.50 by 0830 GMT.

Crude oil has not been included in the list of hundreds of products each side has slapped with import tariffs, but traders said the positive sentiment of the truce was also driving crude markets. But the move also draws another line of division with Saudi Arabia, the only country with which Qatar shares a land border.

They are accusing Qatar of supporting terrorism.

The U.S. benchmark crude oil, West Texas Intermediate, popped more than 5 percent early Monday before paring that gain.

The low oil price benefits consumers in the United States as well as countries such as Turkey and Pakistan, which depend on imports to meet their energy needs.

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