View Banners
Hide Banners


Importers like India may gain from tension in OPEC

The tension within the Organisation of the Petroleum Exporting Countries (OPEC) means more flexibility for big importers like India and China in negotiating deals. But, it also raises concern about changing dynamics and how Russia will play the game, said an industry player.

Qatar’s exit from OPEC sends a clear signal that the powerful oil cartel is getting disintegrated. But, does the tension within OPEC mean good news for big importers like India and China? Will it bring down the prices or make it a more competitive market?

On December 3, a statement from OPEC said that the OPEC Secretary General, Mohammad Sanusi Barkindo, has received a letter from Saad Sherida Al-Kaabi, Qatar’s Minister of State for Energy Affairs, giving notice of its intention to withdraw its membership from the cartel with effect from January 1, 2019.

For importers like India, shaking up of the oil cartel means more room for negotiations based on bilateral relations, which would also result in tougher bargains on pricing.

Prabhat Singh, CEO and Managing Director, Petronet LNG, said: “The scene in the global market is such that most want to produce more, but with OPEC in place a protocol has to be followed. Now, by deciding to move out, Qatar will be free to decide how it wants to go about its business.” However, pricing will continue to be determined at market rates, he said adding “it will definitely be more flexible depending on the relationship it has with the buyers.”

Petronet buys 7.5 million tonnes LNG annually from RasGas of Qatar.

According to Narendra Taneja, an energy expert, “The tensions within the OPEC are good for big importers.”

But, Vandana Hari, founder of Vanda Insights, a Singapore-based oil market analyst, feels that there will be no impact on India from any angle, either in having Qatar as a crude supplier, or indirectly by way of crude price moves resulting from OPEC’s decision this week.

Some of the key players in the industry feel that the development may put to test India’s bargaining skills and diplomatic ties.

“Qatar wants to build new oil alliances with fellow producers and importers. OPEC was clearly coming in the way” Taneja said. Qatar was unhappy with Saudi Arabia’s dominance at the OPEC, he added.

Neutral impact

Given that Qatar has suffered a political and economic boycott by a handful of its Arab neighbours, led by Saudi Arabia since mid-2017, Doha’s decision is not without political overtones, said Hari. “The move may be politically and economically expedient for Doha, but is neutral as far as the impact on OPEC’s continuing efforts to balance global oil markets are concerned,” she observed.

Qatar was a relatively small producer within OPEC, at less than 2 per cent of the group's total output, and remained within its quota agreed in November 2016, starting from February 2017. “It will be free to choose its oil production levels from January, but I don't expect any major changes and certainly not anything that might oppose the OPEC/non-OPEC efforts to restrain production,” Hari added.

Doha’s move could spur some of the smaller cooperating non-OPEC producers to re-evaluate their participation in the output reduction pacts, but is unlikely to derail the OPEC and non-OPEC collaboration. “Russia's cooperation is what matters the most,” she said.

On a similar note, Taneja said, “My sense is that Saudi Arabia and Russia may get even further closer. The growing tensions within OPEC may lead to the formation of a new cartel or a super OPEC, with a smaller membership but with a bigger production capacity and larger oil reserves.”

Source: The Hindu Business Line

Previous Next

Huge Opportunities For Investment in Maritime Sector: Nitin Gadkari

View More Videos

India Tanker Shipping & Trade Summit 2019

View All Albums