Angola to quit OPEC over oil production quotas disagreement
Mario Paiva
Thu, 21 December 2023
Angola is one of the largest oil exporters in Sub-Saharan Africa, alongside Nigeria (Rodger BOSCH)
Angola said on Thursday it would leave OPEC over a disagreement on production quotas following the oil cartel's decision last month to further slash output next year.
Mineral Resources and Petroleum minister Diamantino Azevedo said that the decision was not taken lightly, but OPEC membership no longer served the African country's interests.
"We feel that at this moment Angola gains nothing by remaining in the organization and, in defence of its interests, it decided to leave," the presidency quoted Azevedo as saying in a statement.
The presidency said the decision was taken at a cabinet meeting chaired by President Joao Lourenco in the capital, Luanda.
After the meeting, Lourenco signed a decree to officialise the matter, it said.
Azevedo told state broadcaster TPA that Angola is unhappy with OPEC's decision last month to further slash production next year in an effort to prop up volatile prices.
"We think the time has come for our country to be more focused on our goals," he told state broadcaster TPA.
"If we remained in OPEC... Angola would be forced to cut production and this goes against our policy of avoiding decline and respecting contracts."
OPEC, headquartered in Vienna, did not immediately reply to a request for comment.
- Diplomatic shift -
Angola's departure would hurt OPEC's international standing less than if it was a bigger producer such as Iraq or Saudi Arabia, said ActivTrades analyst Ricardo Evangelista.
The African country has a comparatively small output of about 1.1 million barrels per day.
But the timing couldn't be worse "when the cartel is working hard to convince its members to voluntarily reduce production in order to support prices," Evangelista said.
Angola is one of the largest oil exporters in Sub-Saharan Africa, alongside Nigeria.
Both countries expressed dissatisfaction with their quotas at the November OPEC ministerial meeting as they seek to step up production to secure vital foreign currency.
The meeting had to be postponed for several days because of disagreements.
"When we see that we are in organisations and our contributions, our ideas, do not produce any effect, the best thing is to withdraw," Azevedo said.
The announcement caused a further drop in oil prices already weighed down by expectations of sluggish economic demand. The main international and US crude contracts fell more than 1.5 percent before trimming their losses.
Crude prices are sitting near their lowest level in nearly six months despite the cartel's announcement in November to further cut output.
They have jumped in recent days as cargo shippers and oil firms say they will avoid using the Red Sea and Suez Canal because of drone and missile attacks by Huthi rebels. But they still remain below $80 a barrel.
Nevertheless, crude prices remain above the average of the past five years.
In an effort to prop up prices, the OPEC+ alliance has implemented supply cuts of more than five million barrels per day (bpd) since the end of 2022.
Founded in 1960, the 13-member OPEC cartel in 2016 partnered up with 10 other producers to form OPEC+ to gain more clout.
Discord among members has added to the challenges faced by the OPEC+, which is already contending with rising competition from increasing US crude production and a looming transition away from fossil fuels.
Angola's move fell in line with a recent diplomatic shift that has seen Luanda -- long close to China and Russia -- moving towards the United States, said independent analyst Marisa Lourenco, who specialises in the region.
Leaving OPEC "shows where Angola's foreign policy interests lie, and which it is pursuing with great intention," she told AFP.
Earlier this month nearly 200 states approved a first-ever call for the world to transition away from fossil fuels during the COP28 climate talks in Dubai.
str-lul-ub/rl
Mario Paiva
Thu, 21 December 2023
Angola is one of the largest oil exporters in Sub-Saharan Africa, alongside Nigeria (Rodger BOSCH)
Angola said on Thursday it would leave OPEC over a disagreement on production quotas following the oil cartel's decision last month to further slash output next year.
Mineral Resources and Petroleum minister Diamantino Azevedo said that the decision was not taken lightly, but OPEC membership no longer served the African country's interests.
"We feel that at this moment Angola gains nothing by remaining in the organization and, in defence of its interests, it decided to leave," the presidency quoted Azevedo as saying in a statement.
The presidency said the decision was taken at a cabinet meeting chaired by President Joao Lourenco in the capital, Luanda.
After the meeting, Lourenco signed a decree to officialise the matter, it said.
Azevedo told state broadcaster TPA that Angola is unhappy with OPEC's decision last month to further slash production next year in an effort to prop up volatile prices.
"We think the time has come for our country to be more focused on our goals," he told state broadcaster TPA.
"If we remained in OPEC... Angola would be forced to cut production and this goes against our policy of avoiding decline and respecting contracts."
OPEC, headquartered in Vienna, did not immediately reply to a request for comment.
- Diplomatic shift -
Angola's departure would hurt OPEC's international standing less than if it was a bigger producer such as Iraq or Saudi Arabia, said ActivTrades analyst Ricardo Evangelista.
The African country has a comparatively small output of about 1.1 million barrels per day.
But the timing couldn't be worse "when the cartel is working hard to convince its members to voluntarily reduce production in order to support prices," Evangelista said.
Angola is one of the largest oil exporters in Sub-Saharan Africa, alongside Nigeria.
Both countries expressed dissatisfaction with their quotas at the November OPEC ministerial meeting as they seek to step up production to secure vital foreign currency.
The meeting had to be postponed for several days because of disagreements.
"When we see that we are in organisations and our contributions, our ideas, do not produce any effect, the best thing is to withdraw," Azevedo said.
The announcement caused a further drop in oil prices already weighed down by expectations of sluggish economic demand. The main international and US crude contracts fell more than 1.5 percent before trimming their losses.
Crude prices are sitting near their lowest level in nearly six months despite the cartel's announcement in November to further cut output.
They have jumped in recent days as cargo shippers and oil firms say they will avoid using the Red Sea and Suez Canal because of drone and missile attacks by Huthi rebels. But they still remain below $80 a barrel.
Nevertheless, crude prices remain above the average of the past five years.
In an effort to prop up prices, the OPEC+ alliance has implemented supply cuts of more than five million barrels per day (bpd) since the end of 2022.
Founded in 1960, the 13-member OPEC cartel in 2016 partnered up with 10 other producers to form OPEC+ to gain more clout.
Discord among members has added to the challenges faced by the OPEC+, which is already contending with rising competition from increasing US crude production and a looming transition away from fossil fuels.
Angola's move fell in line with a recent diplomatic shift that has seen Luanda -- long close to China and Russia -- moving towards the United States, said independent analyst Marisa Lourenco, who specialises in the region.
Leaving OPEC "shows where Angola's foreign policy interests lie, and which it is pursuing with great intention," she told AFP.
Earlier this month nearly 200 states approved a first-ever call for the world to transition away from fossil fuels during the COP28 climate talks in Dubai.
str-lul-ub/rl
Emeline BURCKEL
AFP
Thu, 21 December 2023
The expansion of OPEC has proved to be a double-edged sword for the cartel as it means decision-making has become more difficult, according to Swissquote analyst Ipek Ozkardeskaya (JOE KLAMAR)
Angola's departure from OPEC exposes the tensions with the oil cartel as it seeks to cut output to maintain prices just as the United States ramps up production.
Despite slashing oil production for months on end and announcing new cuts in late November, the Organization of the Petroleum Exporting Countries and its ten allies have struggled to boost flagging prices.
Moreover, the wider OPEC+ group faces pressure on multiple fronts, as rising US crude production, a looming transition away from fossil fuels, and discord within its ranks have added to the challenges.
Prices are sitting at their lowest level in nearly six months despite the cartel's announcement in November to further cut output.
They jumped briefly as cargo shippers and oil firms said they will avoid using the Red Sea and Suez Canal because of drone and missile attacks by Huthi rebels. But they still couldn't break above $80 a barrel.
Nevertheless, crude prices remain above the average of the past five years.
In an effort to prop up prices, the OPEC+ alliance has implemented supply cuts of more than five million barrels per day (bpd) since the end of 2022.
After nearly striking $100 in September, the alliance's strategy has since fallen short of reversing the price slide.
While Saudi Arabia blamed speculators for the drop, rather than the weak demand outlook as the world economy struggles, analysts say the cartel's lack of unity has fuelled scepticism about their latest announced cuts.
The decision by Angola will likely further fuel scepticism.
- Frictions laid bare -
"If the supply cuts went broadly unheard it is because the latest discussions showed frictions at the heart of the group," Swissquote analyst Ipek Ozkardeskaya told AFP.
Not only Angola, but also Nigeria expressed dissatisfaction with their production quotas at the November ministerial meeting, which had to be postponed for several days because of disagreements.
Furthermore, the OPEC+ alliance was unable to agree on a group-wide production cut that all 23 members would have supported.
Instead, heavyweights Saudi Arabia and Russia only managed to garner support from six other members in a bid to voluntarily reduce output.
SEB bank energy analyst Bjarne Schieldrop downplayed the impact of the departure of Angola, a smaller producer at 1.1 million bpd.
"Everyone knows that West African countries are in a slightly different league than Middle East countries," he said.
This is due not only to the volume of their production, but their higher production costs, making them more sensible to output cuts.
Moreover, Angola is far from the first small country to quit the cartel. Indonesia left in 2009, Qatar in 2019 and Ecuador in 2020.
"It would be really different if it was one of the key countries in the Middle East, like Kuwait, Iraq…," said Schieldrop.
- 'Double-edged sword' -
Founded in 1960, the 13-member OPEC cartel in 2016 partnered up with 10 other producers to form OPEC+ to gain more clout.
But the group's enlargement has proven to be "a double-edged sword", noted Ozkardeskaya, with decision-making becoming more difficult.
The Vienna-based group drew international attention in 1973, when it imposed an oil embargo against Israel's allies in the midst of the Yom Kippur War, triggering the first oil crisis.
Within just a few months, prices quadrupled, highlighting the cartel's dominance.
Faced with rising competitors in the 1980s, it introduced its famous quota system that enabled it to exert more control over the market.
This strategy meant the group fared relatively well during the 2008 financial crisis and the price shock in the wake of the Covid pandemic, despite increased internal tensions.
As a result of the supply cuts and amid various political crises in Libya and Venezuela, the OPEC+ share of the oil market has fallen to 51 percent -- the lowest since its creation -- the International Energy Agency (IEA) said in its latest report.
Meanwhile, crude production in the United States, the world's leading producer, has risen above 20 million bpd, while Brazilian and Guyanese output has also soared.
"The shift in global oil supply from key producers in the Middle East to the United States and other Atlantic Basin countries... (is) profoundly impacting global oil trade," the IEA said.
- Green transition -
In recent years, OPEC+ has been confronted with its own demise as an increasing number of states have called for a transition away from fossil fuels owing to climate change.
OPEC has an "interest (in) delaying the green transition as much as possible, said Ozkardeskaya.
At the COP28 summit in Dubai this month, OPEC Secretary-General Haitham Al Ghais urged OPEC+ members in a heavily criticised letter to "proactively reject" any language that "targets" fossil fuels rather than emissions.
According to analysts, it is imperative for Riyadh to sustain the inflow of government revenues derived from oil.
They are "essential to finance Saudi Arabia's extensive and multi-year economic diversification programme, including ambitious giga projects", said Stephen Innes of SPI Asset Management.
Riyadh has been working on developing other sources of revenue, but "the transition doesn't happen overnight", UBS analyst Giovanni Staunovo added.
emb/anb-kym/rl/pvh
Thu, 21 December 2023
The expansion of OPEC has proved to be a double-edged sword for the cartel as it means decision-making has become more difficult, according to Swissquote analyst Ipek Ozkardeskaya (JOE KLAMAR)
Angola's departure from OPEC exposes the tensions with the oil cartel as it seeks to cut output to maintain prices just as the United States ramps up production.
Despite slashing oil production for months on end and announcing new cuts in late November, the Organization of the Petroleum Exporting Countries and its ten allies have struggled to boost flagging prices.
Moreover, the wider OPEC+ group faces pressure on multiple fronts, as rising US crude production, a looming transition away from fossil fuels, and discord within its ranks have added to the challenges.
Prices are sitting at their lowest level in nearly six months despite the cartel's announcement in November to further cut output.
They jumped briefly as cargo shippers and oil firms said they will avoid using the Red Sea and Suez Canal because of drone and missile attacks by Huthi rebels. But they still couldn't break above $80 a barrel.
Nevertheless, crude prices remain above the average of the past five years.
In an effort to prop up prices, the OPEC+ alliance has implemented supply cuts of more than five million barrels per day (bpd) since the end of 2022.
After nearly striking $100 in September, the alliance's strategy has since fallen short of reversing the price slide.
While Saudi Arabia blamed speculators for the drop, rather than the weak demand outlook as the world economy struggles, analysts say the cartel's lack of unity has fuelled scepticism about their latest announced cuts.
The decision by Angola will likely further fuel scepticism.
- Frictions laid bare -
"If the supply cuts went broadly unheard it is because the latest discussions showed frictions at the heart of the group," Swissquote analyst Ipek Ozkardeskaya told AFP.
Not only Angola, but also Nigeria expressed dissatisfaction with their production quotas at the November ministerial meeting, which had to be postponed for several days because of disagreements.
Furthermore, the OPEC+ alliance was unable to agree on a group-wide production cut that all 23 members would have supported.
Instead, heavyweights Saudi Arabia and Russia only managed to garner support from six other members in a bid to voluntarily reduce output.
SEB bank energy analyst Bjarne Schieldrop downplayed the impact of the departure of Angola, a smaller producer at 1.1 million bpd.
"Everyone knows that West African countries are in a slightly different league than Middle East countries," he said.
This is due not only to the volume of their production, but their higher production costs, making them more sensible to output cuts.
Moreover, Angola is far from the first small country to quit the cartel. Indonesia left in 2009, Qatar in 2019 and Ecuador in 2020.
"It would be really different if it was one of the key countries in the Middle East, like Kuwait, Iraq…," said Schieldrop.
- 'Double-edged sword' -
Founded in 1960, the 13-member OPEC cartel in 2016 partnered up with 10 other producers to form OPEC+ to gain more clout.
But the group's enlargement has proven to be "a double-edged sword", noted Ozkardeskaya, with decision-making becoming more difficult.
The Vienna-based group drew international attention in 1973, when it imposed an oil embargo against Israel's allies in the midst of the Yom Kippur War, triggering the first oil crisis.
Within just a few months, prices quadrupled, highlighting the cartel's dominance.
Faced with rising competitors in the 1980s, it introduced its famous quota system that enabled it to exert more control over the market.
This strategy meant the group fared relatively well during the 2008 financial crisis and the price shock in the wake of the Covid pandemic, despite increased internal tensions.
As a result of the supply cuts and amid various political crises in Libya and Venezuela, the OPEC+ share of the oil market has fallen to 51 percent -- the lowest since its creation -- the International Energy Agency (IEA) said in its latest report.
Meanwhile, crude production in the United States, the world's leading producer, has risen above 20 million bpd, while Brazilian and Guyanese output has also soared.
"The shift in global oil supply from key producers in the Middle East to the United States and other Atlantic Basin countries... (is) profoundly impacting global oil trade," the IEA said.
- Green transition -
In recent years, OPEC+ has been confronted with its own demise as an increasing number of states have called for a transition away from fossil fuels owing to climate change.
OPEC has an "interest (in) delaying the green transition as much as possible, said Ozkardeskaya.
At the COP28 summit in Dubai this month, OPEC Secretary-General Haitham Al Ghais urged OPEC+ members in a heavily criticised letter to "proactively reject" any language that "targets" fossil fuels rather than emissions.
According to analysts, it is imperative for Riyadh to sustain the inflow of government revenues derived from oil.
They are "essential to finance Saudi Arabia's extensive and multi-year economic diversification programme, including ambitious giga projects", said Stephen Innes of SPI Asset Management.
Riyadh has been working on developing other sources of revenue, but "the transition doesn't happen overnight", UBS analyst Giovanni Staunovo added.
emb/anb-kym/rl/pvh
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