Angola decides to leave OPEC; stakeholders react!

LONDON: Angola has decided to leave the Organization of the Petroleum Exporting Countries (OPEC), its oil minister said on Thursday, saying its membership was not serving the country’s interests.

The departure is unlikely to have a significant impact on oil supplies given Angola’s small percentage of total OPEC output, but the move raises questions about the unity of the group, analysts said.

The following are reactions to the decision:

GIOVANNI STAUNOVO, UBS:

“From an oil market supply perspective, the impact is minimal as oil production in Angola was on a downward trend and higher production would first require higher investments.

“However, prices still fell on concern of the unity of OPEC+ as a group, but there is no indication that more heavyweights within the alliance intend to follow the path of Angola.”

BILL WEATHERBURN, CAPITAL ECONOMICS:

“Angola’s exit from OPEC is symbolic but won’t have a meaningful impact on OPEC’s market power or global oil supply. Angola is a relatively small oil producer and is likely to struggle to raise production much further, even if it is now free from OPEC quotas.”

ALI AL-RIYAMI, FORMER MARKETING DIRECTOR GENERAL AT OMAN’S ENERGY MINISTRY:

“This shows that there is no consensus within OPEC itself and this was for some time now. There will be consequences no doubt about it, but I don’t think others will follow.”

“In my opinion there was no need to take this step, it could’ve been resolved in a better way without sending any negative messages to the market.”

“Anyhow I don’t think this will have significant impact on the oil market or price.”

JAMES DAVIS, FGE:

“While leaving OPEC is the first step to change, unless Angola makes radical changes to its fiscal system, it will still struggle to incentivise investment and grow output.”

OLE HANSEN, SAXO BANK:

“The producer has increasingly been showing discontent with the OPEC+ production straitjacket and favouritism towards Middle East producers.”

RAAD ALKADIRI, EURASIA GROUP:

“It is a sign of Luanda’s dissatisfaction over OPEC’s reallocation of production baselines and its sense that it has more upside than is being acknowledged.

“It doesn’t help OPEC’s efforts to project cohesion, but in production terms it will probably have marginal impact, given investment challenges in Angola.

“The bigger thing to watch for is whether other African OPEC members are tempted to follow suit. Even then, the real impact on balances will depend on investment, but the optics for OPEC will not be good.”

ADI IMSIROVIC, CRUDE TRADER:

“While it is materially not important for Angola, it is a big political blow for OPEC.”

PHIL FLYNN, PRICE FUTURES GROUP:

“The impact on oil supplies is probably going to be negligible and Angola is already pretty much producing as much oil as it possibly can so the concerns that Angola would increase production to make a difference in the global oil supply and demand balance really isn’t a concern.

“Yes, behind the scenes the concern is that Angola’s pulling out of the cartel may signal growing unease with cartel members that have been losing market share to the United States and other non-OPEC producers as they continue to restrain production.”

CRAIG ERLAM, OANDA:

“We’ve seen a small dip in the oil price on the back of the news which suggests traders don’t believe it will be hugely significant.

“It just adds to the existing view that there are cracks appearing in OPEC+ which threatens compliance with the agreed cuts. It will be interesting to see now if others follow in Angola’s footsteps, at which point markets could react more significantly.”