Angola Quits OPEC Over Output Dispute, Exposing the Rift in the Oil Cartel

The Republic of Angola’s abrupt departure from the Organization of the Petroleum Exporting Countries (OPEC) marks a decisive turn in the group’s unity, raising concerns and signaling a growing rift within the coalition of oil-producing nations.

The move announced following a cabinet meeting on Thursday, lays bare a deepening conflict between Angola and OPEC, exposing underlying tensions over output limits that failed to accommodate Angola’s diminishing oil production capacities.

Minister of Mineral Resources, Diamantino Azevedo, voiced Angola’s disillusionment with OPEC, stating, “Our role in the organization was not deemed relevant… it no longer makes sense for us to remain in the organization.”

This rupture evolved from a deal in June, which allocated a higher production target to the United Arab Emirates, compelling Angola to accept a reduced output limit for 2024, per Bloomberg.

Angola’s oil capacity has plummeted by nearly 40% over eight years to approximately 1.14 million barrels a day, accentuated by insufficient investments in aging, deepwater oil fields, according to data from Bloomberg. However, the quota debacle intensified when OPEC, following a delayed ministerial meeting, imposed an even more stringent production cap of 1.1 million barrels a day, exacerbating the already strained relations between Angola and the organization, Bloomberg reported.

This situation significantly reduced the country’s production below the target agreed with its OPEC counterparts, contributing largely to the dispute.

While Angola’s decision to exceed the imposed quota may be symbolic due to its dwindling output, it underscores the breakdown in relations between the country and OPEC. Industry analysts speculate that this move might not significantly impact global oil supplies since Angola was already operating near full capacity, disregarding OPEC+ quotas.

There’s “no impact on supply forecasts as Angola is already producing at full capacity rather than limiting output due to OPEC+ quotas,” said Richard Bronze, head of geopolitics at consultant Energy Aspects Ltd. It “doesn’t directly impact quotas or production plans for other OPEC+ countries.”

This dissent, previously expressed in private by other members, indicates a growing discord within the cartel’s leadership, potentially posing future challenges.

However, Javier Blas, a Bloomberg analyst said while Angola’s exit mirrors the limited impact of previous departures – Indonesia, Qatar, and Ecuador, it signals some troubling developments for OPEC.

“The announcement, with the government in Luanda openly expressing its frustration with the cartel, sheds some light on an open secret: Lots of OPEC member countries are less than happy about the direction the group has taken over the last few years under the leadership of Saudi Arabia,” he said.

Blas noted that the bone of contention, which has been expressed always in private by other members of the oil cartel, is that Riyadh is trying to keep oil prices too high, close to $100-a-barrel, which is propping up rivals, notably the US shale industry.

If OPEC continues doing so, he said, sooner or later it would have to cut production even more, ceding more market share. Other OPEC members would be happy with oil prices lower, in the $60-to-$70 range, he added.

This complaint is accompanied by another one: Riyadh, under its Energy Minister Prince Abdulaziz bin Salman, appears unresponsive to the concerns raised by others and is seemingly attempting to coerce dissenting views into submission.

“The departure of Angola makes it more likely that Riyadh will have to let the UAE to produce, over time, even more oil. The risks for OPEC start in Luanda — but ultimately end more dangerously in Abu Dhabi,” Blas noted.

As tensions escalate, Angola’s departure could foreshadow a more tumultuous path ahead for OPEC, triggering uncertainties in the global oil market.