Angola, a key member of the Organization of the Petroleum Exporting Countries (OPEC) since 2007, has declared its intention to leave the organization.
This move is a response to what Angola perceives as a misalignment between its national interests and OPEC’s production quotas.
This significant decision sheds light on the challenges within OPEC and its impact on the global oil market.
The Genesis of the Exit
The decision, as confirmed by Angola’s Oil Minister Diamantino Azevedo, comes after a prolonged period of dissatisfaction with OPEC’s production quotas.
- Angola, producing approximately 1.1 million barrels of oil per day, has been grappling with a production target set by OPEC that the country considers restrictive and not reflective of its capabilities and economic needs.
- The rift between Angola and OPEC’s leadership had been simmering for some time. It escalated last summer when Angola was asked to accept a reduced production target for 2024, acknowledging the nation’s declining production capacity.
- Angola’s oil output has seen a significant reduction, dropping about 40% over the past eight years due to inadequate investment in aging, deepwater oil fields.
Minister Azevedo, in his statement, emphasized the lack of alignment between Angola’s aspirations and the benefits derived from OPEC membership.
- “As a country, when we participate, it is to contribute, expecting results that align with our interests,” Azevedo stated. “When this doesn’t occur, we become redundant, and it no longer makes sense for us to remain in the organization.”
Despite efforts, including a review by external consultants, the disagreements reached a tipping point when OPEC imposed a lower quota of 1.1 million barrels a day in its latest meeting, a figure below Angola’s current output.
OPEC’s Dilemma
Angola’s exit from OPEC is not just a national decision but a significant setback for the organization, which has been striving to maintain a delicate balance in oil production to support prices.
- Angola’s departure, following the earlier exits of countries like Qatar, Indonesia, and Ecuador, highlights the growing challenges within OPEC in managing member countries’ diverse economic and production capacities.
As of now, OPEC, headquartered in Vienna, has not issued an official comment on Angola’s decision to withdraw.
However, the organization will likely face increased pressure to revisit its production quota policies and strategies to maintain unity among the remaining members and sustain its influence in the global oil market.
Future Implications
Angola’s departure reduces OPEC’s membership to 12 nations and raises questions about the future cohesion and strategy of the organization.
- With Saudi Arabia at the helm, OPEC and its allies have been trying to control supplies to stabilize oil prices, a task that might become more challenging with the exit of a key African member.
- The announcement had an immediate effect on the global oil market.
- Brent crude prices witnessed a noticeable dip, falling over $1 to $78.50 a barrel by 1250 GMT on the day of the announcement.
