By Peter Bergman (MoneyAmped.com)
On Thursday, Angola announced its decision to withdraw from OPEC, a setback for the oil producer group led by Saudi Arabia. In recent months, OPEC has sought support to implement additional production cuts to stabilize oil prices.
OPEC Is Not in Angola’s Interest
According to Angola’s Oil Minister, Diamantino Azevedo, it has been expressed that OPEC is no longer aligned with the interests of Angola. In the past decade, OPEC has witnessed the departure of Ecuador and Qatar, two mid-sized producers, who have discontinued their membership within the organization.
According to a statement from the presidency, Azevedo expressed the belief that Angola does not benefit from its continued membership in the organization and has decided to withdraw to protect its interests.
On Thursday, international oil prices experienced a decline of approximately 2.4%. Analysts have expressed concerns regarding the departure’s impact on the commonality of OPEC and OPEC+, a broader coalition encompassing Russia and other OPEC allies. The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, have decided to implement a fresh set of measures to reduce oil production starting in January. This strategic move aims to bolster the global oil market.
According to UBS analyst Giovanni Staunovo, the price decline can be attributed to concerns about the cohesiveness of OPEC+ as a group. However, there needs to be an indication that other influential members of the alliance plan to take the same course of action as Angola.
The Reason for Angola’s Withdrawal From OPEC Is the Reduction of Oil Production Quota
Angola’s recent decision to withdraw from OPEC+ can be attributed to its dissatisfaction with the organization’s resolution to reduce its assigned production quota for the year 2024. The disagreement contributed to the postponement of OPEC+’s most recent rules in November and the delay in reaching an agreement on implementing new restrictions on oil production.
According to Ali Al-Riyami, an earlier advertising director broad at Oman’s power service, there is evident a lack of agreement within OPEC, which has been the case for a significant period.
There will inevitably be repercussions. However, it is unlikely that other nations will choose to emulate this course of action.
As an African member of the Organization of the Petroleum Exporting Countries (OPEC), Nigeria has been trying to increase its oil production. However, it has faced challenges in meeting its assigned production quota. During the November meeting, the organization was given a revised OPEC+ target for 2024. While the set target was lower than initially desired, it limits the organization’s capacity to ramp up production, if feasible.
The Market Share Is Falling
According to three anonymous OPEC delegates, Angola’s unexpected decision to withdraw from the organization was a surprise. They had anticipated that the disagreement regarding Angola’s quota would eventually be resolved.
Angola became a member of OPEC in 2007 and currently produces approximately one million gallons of oil daily. In comparison, the entire OPEC group has around 28 million barrels per day.
The withdrawal of Angola from OPEC will reduce the organization’s membership to 12 countries. Additionally, OPEC’s crude oil production will decrease to approximately 27 million barrels per day, which accounts for around 27% of the global oil market’s total output of 102 million barrels per day.
This resulted in a decrease in OPEC’s global market share, which was 34% in 2010.
In addition to the departure of certain members, the market share of OPEC has been impacted by the decisions made by OPEC and OPEC+ to decrease production, as well as the increased output from non-OPEC countries such as the United States.
It is anticipated that Brazil will become a member of OPEC+ starting in January. However, it will not actively participate in the group’s efforts to limit oil production.
In recent years, Angola has faced challenges in meeting its OPEC+ quota for oil production due to declining investment and limited progress in developing significant new oilfields.
The organization has faced challenges in recovering from a decline in production since reaching its highest level of 2 million barrels per day in 2008. According to a high-ranking government official, it anticipates sustaining its production levels until 2024.
The oil and gas sector in Angola constitutes approximately 90% of the country’s total exports. However, the government has recognized the need to decrease its heavy dependence on this sector, especially in light of the adverse impact caused by COVID-19 and the decline in global fuel prices.
Several major oil companies, both large corporations and independent entities, are active in southern Africa. These include TotalEnergies, Chevron, ExxonMobil, and Azule Energy, an alliance between Eni and BP.
