Oil prices spike as Qatar drops out of Opec, rumours of production cut
Qatar plans to pull out of the Organization of the Petroleum Exporting Countries (OPEC) in January, the country's energy minister warned on Monday.
Oil prices surged on the news, with front-month Brent crude futures jumping 4.4% to $62.1 per barrel and WTI almost 5% to $53.33.
At a news conference on Monday, Qatari energy minister Saad al-Kaabi said: "Qatar has decided to withdraw its membership form OPEC effective January 2019 and this decision was communicated to OPEC this morning."
He said Qatar would still attend the OPEC meeting in Vienna this week but had made the decision to drop out of the oil producers cartel after a review of the country's long-term strategy and increased focus on the gas industry.
Qatar is not one of OPEC's major oil producers but is the world's largest exporter of liquefied natural gas.
Analyst Naeem Aslam at Think Markets said: "Qatar leaving the OPEC isn't as great news for the oil market and the market participants haven't digested the full impact of this news.
"Basically, Qataris have brought the biggest weapon out and it only means more instability between the Qatari and Saudi relationship. In fact, we would not be surprised if other counties start to follow the same path and then we have no control over supply or demand as each individual country could just do what they like."
Met analyst Michael Hewson at CMC Markets felt the departure of Qatar "is unlikely to materially alter the dynamics of how the cartel operates, however it does give an insight into the uneasy politics such alliances bring to bear".
He added: "Given its treatment in the last few months by its peers it would appear that Qatari leaders feel that there is little upside in being in an organisation that does nothing to represent its interests."
Ahead of the Vienna meeting, some analysts were predicting OPEC will agree a production cut, led by Saudi Arabia.
RBC Capital Markets said it was their "strongly held view" that OPEC "will opt to roll back the ill-fated summer supply surge, cutting at a minimum 1 mb/d and potentially as much as 1.4 mb/d of production or more".
With Saudi Arabia having driven the output increase "in part to please President Trump", is felt likely to bear the bulk of the adjustment burden, though is trying to secure commitments from other producers to do their part, especially the previously exempted countries like Libya and Nigeria.