As is usually the case, the Qatari media sparked a senseless uproar following Doha’s decision to pull out of Opec (Organisation of the Petroleum Exporting Countries). It has to be noted that Opec has seen through its history the exit of more systemically important countries than Qatar in terms of oil reserves and production volumes, including Indonesia, which exited and rejoined the organisation more than once.
2%Less than this amount of Opec’s total oil production comes from Qatar.
Ecuador and Gabon did the same, meaning that it is nothing new. However, the Qatari media may have been excited to draw in attention during a volatile phase for the oil markets and crude prices.
Amrita Sen, partner and chief oil analyst at Energy Aspects, said Qatar is a small player in the oil markets and “We reiterate that it is really very, very small”.
It produces less than 2 per cent of Opec’s total production, which is also true for its oil reserves. The Gulf state ranks 11th among 15 members in the organisation, and therefore, its exit will not have an effect on oil supplies or prices, Sen added.
It is undeniable that Qatar’s exit has come in late and will not achieve what Qatar aspires as easily as shuffling cards. The departure will not disadvantage the rest of the member countries as the balance of power in the global oil market has changed a lot in the past five years.
Although Opec remains the first determinant in the oil market, there is now the reality of Russia’s coordination of its policies with Opec, and the US presence with shale oil. Thus, these two countries have become key players in the oil market, where trends are now being identified by strategic cooperation between the most important Opec producers — namely Saudi Arabia, the UAE, Kuwait and Iraq on the one side — and Russia on the other.
This is an important development, which has led to a balancing of the oil markets and stabilising of prices at rates conducive for producers and consumers. It is clear that Qatar has tried, with malicious intentions, to break this alliance by alleging that one country controls the organisation, referring to Saudi Arabia.
It keeps forgetting that it cooperates with countries on policies and strategies, and will not be affected by cheap media noise. Saudi Arabia, the largest producer, fully coordinates policies with the UAE through the Saudi-Emirati Coordination Council in many areas, including the oil sector.
In addition, its agreement with Russia has positively reflected on all oil producing countries within and outside Opec and was widely welcomed. The bottom-line is in actions rather than words.
Influencing the markets
Moreover, Saudi Arabia, the UAE and Kuwait account for half of Opec’s total production, and they have the right on the final say in agreements, though this does not abolish the role of others. They do their part at the regular Opec meetings through having their representatives, which means that there is collective work by all member-states.
Perhaps the most important question is whether Qatar will raise its output or reduce it to influence the markets. This question can be easily answered, as Qatar’s influence will be a net zero as Doha is not Saudi Arabia, UAE, Kuwait, Iraq, Russia, or the US.
Qatar’s daily production amounts to 600,000 barrels and can reach 800,000—900,000 barrels as a maximum, of which 200,000 barrels is for domestic consumption. Therefore, such a quantity is not effective and even in case it stopped it production, it would be still easy to cover its share by any one of the three Gulf countries, For example, Iran’s exit, which exports more than 2.5 million barrels a day, had limited impact and the resultant gap was bridged. This means plugging the 450,000 barrel gap is an issue not worth considering.
Qatar certainly expects other countries to follow its example by withdrawing from Opec. However, member-countries will pursue their interests and will not be tricked by media hype. Individual interests are the first and main determinants of the policies of countries.
The interest among Opec countries is to stay on as members of the organisation, a fact that the Qatari leadership is yet to understand, especially when it comes to its foreign policies. It mistakenly believes that everything can be purchased by money.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.