Global Oil Prices Dip Following Angola's OPEC Exit Announcement
Global Oil Prices Dip Following Angola's OPEC Exit Announcement

Global Oil Prices Dip Following Angola's OPEC Exit Announcement

  • 22-Dec-2023 5:35 PM
  • Journalist: Nicholas Seifield

Global oil prices took a hit on Thursday as news emerged of Angola's decision to withdraw its membership from the OPEC. The country's move has raised concerns about OPEC's ongoing efforts to support oil prices by controlling the supply in the global market.

The announcement of Angola's impending exit from OPEC sent shockwaves through the industry, resulting in a $1 decrease in oil benchmarks. The country's oil minister, Diamantino Azevedo, asserted that remaining part of OPEC was not in Angola's best interests. Over the past few months, OPEC, led by Saudi Arabia, has been rallying support for reducing output and driving up oil prices.

Shipping tracking firm Kpler's Matt Smith suggested that OPEC appears to be losing its battle to keep prices high, especially as non-OPEC producers like the U.S. increase production to fill the emerging supply gap. Angola's daily oil production, which is around 1.1 million barrels, is a small percentage of OPEC's total daily output of 28 million barrels.

Angola might be one of the smaller contributors to OPEC's output, but its decision to leave the group has prompted questions about OPEC's unity and future strategy. However, Smith also pointed out that the impact of Angola's departure on global supplies could be relatively minor.

In November, Angola voiced its dissatisfaction with OPEC's decision to cut its production quota for 2024, an action taken by the organization to bolster oil prices. Meanwhile, the U.S. Energy Information Administration (EIA) reported last week that U.S. crude output had hit a record high of 13.3 million barrels per day, exceeding the previous record of 13.2 million barrels per day.

Recent attacks by the Yemeni Houthi militant group on vessels bound for Israeli ports have caused major maritime carriers to steer clear of the Red Sea, disrupting global trade. The group's actions, taken in support of Palestinians, have led to increased apprehension in the market about potential disruptions or delays in supply.

PVM analyst John Evans suggested that the significant upsurge in U.S. crude output implies that the market is worried about possible supply diversions or interruptions due to the Houthi attacks on shipping. Meanwhile, tensions continued to rise on Thursday between Israel and Hamas, despite ongoing peace negotiations.

Angola's exit from OPEC has stirred up concerns about the organization's ability to manage oil prices and maintain unity among its members. While the immediate impact on global supplies may be minimal, the long-term implications for OPEC and the global oil market are still uncertain. As non-OPEC producers like the U.S. ramp up production, and geopolitical tensions continue to disrupt shipping routes, these factors will undoubtedly influence the future direction of oil prices.

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