Angola’s OPEC exit highlights group tensions – but is unlikely to rattle the market

Key Points

• Angola’s Departure from OPEC: Angola’s decision to exit the Organization of the Petroleum Exporting Countries (OPEC) highlights longstanding tensions within the group. The move follows a deep disagreement at the extended OPEC+ meeting in November over production baselines, where Angola and Nigeria opposed efforts to deepen their baselines as they aimed to boost declining outputs. This departure, while not surprising to analysts, is seen as a symbolic manifestation of internal challenges within OPEC. Angola’s exit leaves OPEC with 12 members, constituting around 27% of the world crude market.
• Limited Market Impact: Analysts suggest that the market impact of Angola’s departure from OPEC is likely to be limited. Despite concerns about unity, experts emphasize that heavyweights within the alliance do not presently indicate an intention to follow Angola’s path. The market has already shown resilience, with oil prices rebounding from a dip on the day of the announcement. Angola, accounting for less than 4% of OPEC output, was already maximizing its production, and higher production would require significant investments, making the impact on oil supply minimal.
• Rising Tension and Future Challenges: While Angola’s departure may not significantly affect global oil supply, it serves as another example of rising tension within OPEC. Analysts anticipate a slightly negative impact on energy shares in the short term, as the move provides an excuse for market players to extend their negative bias. More significant challenges for OPEC+ are identified in the upcoming inclusion of Brazil into OPEC+ and the current record-high U.S. crude output. These factors present a challenge for OPEC+ members to manage a well-supplied market relative to demand, not only in the coming year but in the next several years, requiring cohesion and capability signals to the market.