OPEC, geopolitics, Sino-US trade truce moderate oil market
Qatar’s exit from OPEC to focus on gas development targeting the United States of America and the easing trade relations between China and the US are some of the factors set to drive oil demand and market in 2019.
Even before taking over Qatar’s energy policy in a government reshuffle last month, Saad al-Kaabi, Qatar Petroleum (QP) CEO, had long wanted the Gulf state to leave the OPEC.
Kaabi was concerned OPEC membership could be a stumbling block for QP’s ambitions in the United States, where it has one of the world’s biggest LNG terminals, and a distraction as Doha doubles down on gas production, three industry sources said.
Proposed US legislation known as NOPEC (No Oil Producing and Exporting Cartels Act) could expose members of the oil exporters club to antitrust lawsuits, a risk for QP at a time it is planning to invest billions more in the United States.
The sources said Qatar’s exit had been in the works for months, driven by Kaabi’s desire to focus on Qatar’s strength in liquefied national gas (LNG) rather than OPEC, where Doha has little say anyway because it doesn’t produce much oil.
“It takes Qatar out of the whole debate within the U.S. Congress on whether or not OPEC is a cartel,” said James Dorsey, a senior fellow at the S. Rajaratnam School of International Studies. “If anything it puts Qatar in America’s good books.”
The decision to leave after 57 years just two days ahead of a crucial OPEC output policy meeting in Vienna last week also struck many as a shot at Saudi Arabia, which along with the Bahrain, Egypt and the United Arab Emirates has imposed a boycott on Qatar since June 2017.
The absence of Qatar’s emir from an annual Gulf Arab summit in Saudi Arabia on Sunday was then seen as a sign there is no end in sight to the dispute and that Qatar is set to go it alone – outside a six-nation Gulf Arab bloc fractured by the rift.
Qatar would nevertheless still welcome the lifting of the trade and transport boycott which has hit national carrier Qatar Airways, companies with interests in boycotting states and demand from regional investors and banks.
But the risk of possible legal action under NOPEC has become a concern for Doha as it aims to cement its rank as the world’s biggest LNG producer, the industry sources told Reuters.
State-owned QP is the majority owner of the huge Golden Pass LNG terminal in Texas, with U.S. oil companies Exxon Mobil Corp and ConocoPhillips holding smaller stakes.
“We don’t have enough weight in OPEC to have an effect,” he told reporters on the eve of his first and last meeting as the head of Qatar’s OPEC delegation.
Oil prices steadied in the week ending 14 December, under pressure from high inventories but buoyed by a drawdown in U.S. crude stockpiles and indications that the trade war between the United States and China may be easing.
Global oil supply has outstripped demand over the last six months, inflating inventories and pushing crude oil to its lowest in more than a year at the end of November.
But the OPEC and other big producers, including Russia, agreed last week to reduce supply to try to trim the surplus.
In a sign that China wants to lower trade tensions with the United States, the country made its first major U.S. soybean purchases in more than six months on Wednesday. Investors breathed a sigh of relief across broader stock markets.
A drop in US crude stocks also boosted oil, which has been riding higher on expectations that the OPEC-led planned output cuts would re-balance the market in 2019.
US crude inventories fell by 1.2 million barrels in the week to December 7, compared with expectations for a decrease of 3 million barrels.
A combination of factors such as production cuts by OPEC and non-OPEC producers such as Russia and further sanctions-related declines in Iranian exports are likely to keep markets tight in the first half of next year, Jefferies analyst Jason Gammel said.