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Angola’s Opec exit points to growing divisions on quotas

FILE PHOTO: Angola's Minister of Mineral Resources, Petroleum and Gas Diamantino Pedro Azevedo arrives at the OPEC headquarters for a meeting in Vienna, Austria, June 3, 2023. REUTERS/Leonhard Foeger/File Photo Reuters/Leonhard Foeger
Angola's minister of mineral resources, petroleum and gas Diamantino Pedro Azevedo, said that the decision to leave Opec was not taken lightly
  • Move unlikely to affect supply
  • Opec+ pressure to cut production
  • ‘Emerging cracks’ in unity

Angola’s decision to leave the Organisation of the Petroleum Exporting Countries (Opec) over a production quotas dispute will have a limited impact on oil supply but highlights cracks in the organisation’s long-term unity, industry analysts have said.

Diamantino Pedro Azevedo, Angolan mineral resources minister, said the African country’s role in the organisation was not deemed relevant. “It was not a decision made lightly. The time has come,” he said.

Brent prices were trading over $80 on Friday morning, rising 0.82 percent, while WTI was trading at $74.51, up 0.87 percent, despite Angola’s decision.

“The sudden exit of Angola could be due to the disagreements over the reference and quota levels,” said Aditya Saraswat, vice president of Middle East analysis at Rystad Energy.

Opec+ consists of the Saudi-led Opec bloc and the Russian-led non-Opec group, which has 10 participants.

It has been putting pressure on some African members to reduce their quotas, as the organisation implemented several output cuts to stabilise oil prices, which have been falling since September.

“As Opec+ further moved to review the reference levels of the wider group of countries, it planned to reduce the country’s quota levels and hold the members liable for cuts,” added Saraswat. Angola did not accept the move.

While it may be Africa’s second-largest crude oil producer, Angola’s output has declined by about 40 percent. 

Ramping up production

Saraswat said the country has been struggling to ramp up its crude oil production over the last decade, mainly due to underinvestment. It was eyeing a quota of 1.18 million barrels per day, which the Opec+ group later revised to 1.11 million.

“The country relies heavily on oil revenues; the cuts then would impact its ability to continue investing in the upstream sector and, hence, could further limit any production upside,” Saraswat said. 

Christof Rühl, a senior research scholar at Columbia University Centre on Global Energy Policy, said Angola’s announcement was an example of “emerging cracks” within Opec.

The quotas dispute has escalated recently, leading the oil alliance to delay its last meeting.

The market share of Opec+ has already shrunk to 51 percent – the lowest since the expanded group was set up in 2016 – as production from non-Opec countries, such as the US, Brazil, and Guyana, is offsetting Opec+ cuts.

After Angola’s exit the Saudi-led Opec bloc decreases to 12 members.

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