Oil prices rose on Monday December 3, as China and US agreed not to levy new tariffs on each other and Qatar decided to quit OPEC, wrapping up its 57-year membership.
The world’s largest and second largest economies agreed not snap additional tariffs, and gave instructions to economic teams concerning negotiations towards the removal of such additional tariffs and a mutually beneficial deal.
Analysts observe that, oil markets were boosted by optimism following the dialogues between the two economies, which ultimately lifted investors’ sentiment.
Doha announced on the same day that it would withdraw from OPEC on Jan 1, 2019, ending its membership lasting 57 years.
Doha’s announcement came three days before a meeting between the oil cartel and its allies, which is aimed at reshaping global oil polices in the face of lingering concerns over an excessive supply.
Doha attended the group’s meeting on Thursday in Vienna. The UAE said on the same day that despite a bitter row with Doha, the Gulf Cooperation Council remained valid.
Anwar Gargash, UAE Minister of State for Foreign Affairs, said the major success of the council lies in economic aspects and establishment of a Gulf common market.
Saad al-Kaabi , Qatar’s Minister of State for Energy Affairs made veiled criticism against Riyadh, saying the oil business is controlled by an organization that is managed by a nation. However, Doha said the decision to quit was not driven by political factors.
Doha’s decision comes at a time when the OPEC needs to roll out a deal amid market’s skepticism in the oil cartel’s capability to manage production, said Ann-Louise Hittle, head of macro oils service at Wood Mackenzie.
Though Qatar is the smallest Middle oil producer of the cartel, with a daily output staying at just over 600,000 barrels, it’s the largest liquefied natural gas (LNG) exporter in the world, with an annual output hitting about 77 million tonnes.
OPEC features complex geo-politics, and focuses on oil, the position of Qatar doesn’t surprise us. They stated the position is to concentrate on the expansion of LNG portfolio, which does make sense.
Investors have been anticipating OPEC to announce a production cut, and the market has been very cautious and is awaiting more details concerning production changes, such as size and time.
On the NY Mercantile Exchange, the West Texas Intermediate for Jan. delivery rose by $2.02, closing at $52.95 per barrel, whilst on the London ICE Futures Exchange, Brent crude for Jan. delivery increased by $2.23, closing at $61.69 per barrel.