Angola said on Thursday it would leave OPEC in a blow to the Saudi-led oil producer group that has sought in recent months to rally support for further output cuts to prop up oil prices. Angola’s oil minister Diamantino Azevedo said the Organisation of the Petroleum Exporting Countries no longer served the country’s interests. It joins other mid-sized producers Ecuador and Qatar, which have left OPEC in the last decade. “We feel that … Angola currently gains nothing by remaining in the organisation and, in defence of its interests, decided to leave,” Azevedo was quoted as saying in a presidency statement. Oil prices fell by nearly 2% as analysts said the departure raised questions about OPEC’s unity. “Prices 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,” UBS analyst Giovanni Staunovo said.
Angola, which joined OPEC in 2007, produces about 1.1 million barrels of oil per day, compared with 28 million bpd for the whole group. OPEC did not immediately reply to a request for comment. Three delegates from the group who spoke on condition of anonymity said Angola’s decision to leave came a surprise. The country has been unable to produce enough oil to meet its OPEC quota since 2019. It has struggled to reverse falling output since hitting a peak of 2 million bpd in 2008 and expects to maintain current production into 2024, a senior government official said in October. Last month, Azevedo’s office protested against a decision by OPEC to cut its production quota for 2024, which could have curtailed any ability it might have to increase output.
Disagreements over African output quotas had earlier been in part the cause of a delay to a meeting of the wider OPEC+ oil producer group. Oil and gas exports are Angola’s economic lifeblood, accounting for around 90% of total exports, an over-reliance the government has been seeking to reduce after it was hit hard by the COVID-19 pandemic and lower global fuel prices. Several oil majors and independents operate in the southern African nation, including TotalEnergies, Chevron, ExxonMobil and Azule Energy, a 50/50 venture between Eni and BP. Angola oil minister said on Thursday, that 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:
Giovani 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 on his part said “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 said “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 said “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 said “The producer has increasingly been showing discontent with the OPEC+ production straitjacket and favouritism towards Middle East producers.”
Raad Alkadiri, Eurasia Group said “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.”
REUTERS