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The limits of the Organization of the Petroleum Exporting Countries’ ability to squeeze the global oil market are being put in relief.
Angola, one of Africa’s biggest oil producers, is leaving the cartel because it doesn’t want to comply with its demand to lower output to 1.1 million barrels of oil a day, Reuters reported Thursday. The Wall Street Journal also reported the departure, citing the local news agency Angop.
OPEC wasn’t immediately available for comment, the Journal said.
Angola accounts for only a fraction of the more than 30 million barrels a day that OPEC members produce, and even less of the nearly 100 million barrels a day in global output. Nevertheless, the country’s exit shows the strains OPEC is under as it tries to prop up global oil prices, which have dropped some 9% this year.
OPEC resolved recently to extend production cuts into next year. Saudi Arabia, the world’s third-biggest oil producer at about 9 million barrels a day, is voluntarily reducing output on top of OPEC cuts. So is Russia, which produces about 9.5 million barrels a day. Russia isn’t an official member of OPEC, but works with the so-called OPEC+ group of countries.
The dispute over limiting output exposes a tension for countries that rely on energy exports for national income. All benefit from higher prices, but to maximize revenue, they have to keep production high. Higher production, however, increases global supply and pushes oil prices down.
Thus, any big run up in global oil prices, such as the one that happened after Russia invaded Ukraine last year, will carry the seeds of its own destruction. High prices give companies and countries an incentive to bring more oil to market.
OPEC’s efforts to keep prices higher have also been undermined by more U.S. production. U.S. output has climbed to almost 13 million barrels a day, making it the biggest producer in the world and a net exporter of crude.
It isn’t unheard of for countries to leave OPEC. Ecuador was the more recent one to do it when it left in 2020, and Qatar dropped out the year before. When Angola leaves, the group will be left with 12 formal members.
West Texas Intermediate or
WTI,
the U.S. benchmark, fell 1.9% Thursday to $72.82 a barrel.
Brent
crude, the international standard, dropped 2% to $78.10 a barrel. The drop in prices runs counter to recent gains driven by attacks on ships in the Red Sea, which is disrupting transportation routes.
Write to Brian Swint at brian.swint@barrons.com
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