Angola's Exit From OPEC Fuels Crude Oversupply Concerns
22 December 2023 - 4:17AM
Dow Jones News
By Anthony Harrup
Angola's decision to leave the Organization of Petroleum
Exporting Countries after 16 years over disagreement with its
production quota is likely to put downward pressure on oil prices
as it could encourage other members not to stick to their targets,
analysts say.
Angola, one of OPEC's biggest African producers with output of
1.13 million barrels a day in November according to OPEC's latest
report, said Thursday that it plans to leave the group, official
news agency Angop reported.
The decision, taken at a cabinet meeting and announced by
Angolan Oil Minister Diamantino de Azevedo, came after the oil
cartel reduced the country's oil output target to 1.11 million
barrels per day as part of a series of cuts set out at its latest
ministerial meeting.
Several African producers including Angola were opposed to
target reductions, which led the cartel to postpone its meeting for
four days in late November. Angola and Nigeria weren't among
members offering additional voluntary cuts.
Saudi Arabia, the United Arab Emirates and OPEC+ member Russia
are taking more of a price-over-volume line, "and that really is
difficult for some of the smaller nations to swallow given their
cash situations compared with the kingdom," said Gary Cunningham,
director of market research at Tradition Energy.
"It's not a huge shock. We thought they would have stormed out
of the meeting a few weeks ago, but I think it's more about the
fact they can't just stay in it and be controlled by production
targets," he added.
OPEC wasn't immediately available for comment when contacted by
Dow Jones Newswires.
After the Nov. 30 meeting, which was moved online instead of
being held as originally planned at the cartel's headquarters in
Vienna, OPEC said that Saudi Arabia and Russia would extend their
voluntary additional output cuts of 1.3 million barrels a day
through March, and that others would contribute around 900,000
barrels a day in voluntary reductions for a total reduction of
about 2.2 million barrels a day.
Oil prices continued to fall in the following weeks, however, as
doubts about commitment to those cuts stoked concerns about
eventual oversupply in the market. U.S. production, which last week
rose to a record 13.3 million barrels a day, has added to concerns
about oil surpluses.
"It does show that members are beginning to be more uneasy, and
we could see further fallout," said Dennis Kissler, senior vice
president at BOK Financial. "It's a negative factor to prices as
more supply is likely and members overproduce."
Oil futures, which have risen this week on concerns about
shipping delays in the Red Sea as a result of Houthi rebel attacks
on vessels, fell Thursday on news of Angola's decision. WTI for
February delivery was recently down 0.7% at $73.68 a barrel, above
an earlier low of $72.44. Brent for February was down 0.6% at
$79.21.
Angola's exit "increases the chances of a pump-at-will oil
production showdown," said Robert Yawger, executive director for
energy futures at Mizuho Securities USA in a note.
-Giulia Petroni contributed to this report.
Write to Anthony Harrup at anthony.harrup@wsj.com
(END) Dow Jones Newswires
December 21, 2023 12:02 ET (17:02 GMT)
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