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Qatar's Exit From OPEC: Not A Bear's Dream Come True


  • At first glance, concerns over Qatar now leaving OPEC after more than 57 years of membership may signal bearish prospects ahead.
  • However, given the country's reason(s) for leaving, it's unlikely any bearish scenario will hit markets.
  • If anything, this will be either neutral for crude prices, or there's a small chance that it could be bullish.
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Anybody who has been watching the oil markets in recent months can attest to the fact that investors have had to deal with a tremendous amount of volatility, driven by a mix of fears centered around soaring US output, weaker global demand growth, and whether or not OPEC and some of its non-OPEC allies like Russia will intervene again to result an early glut and push prices higher. Now, just as prices have begun to climb higher again, thanks in part to the likely outcome of OPEC actually cutting production, but also due in large part to trade tensions between the US and China easing, another shocking development has stirred up the pool: come January 1st of next year, Qatar will be leaving OPEC and will, instead, operate autonomously in the oil markets. This development may rattle investors at first, but if anything, it’s more likely to be either a neutral or, possibly bullish even, outcome for investors in this space.

A look at developments

According to an article published on CNBC, Saad al-Kaabi, Qatar’s Energy Minister, announced that as of January 1st, the nation will no longer be an active member of OPEC. This is the first time the nation will have left the group since it joined 57 years ago. To energy bears, this might come across as a further sign of the group fracturing. This is notable because in any scenario, besides one involving significant armed conflict, where OPEC falls apart would almost certainly be a net negative for oil prices since that group of nations left directionless would probably compete openly and aggressively on price at a time when their own output is cheaper than US shale.

Fortunately, though, the chance of this leading to a further decline in OPEC’s structure is slim to say the least. This is

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This article was written by

Daniel Jones profile picture
Robust cash flow analyses of oil and gas companies

Daniel is an avid and active professional investor. He runs Crude Value Insights, a value-oriented newsletter aimed at analyzing the cash flows and assessing the value of companies in the oil and gas space. His primary focus is on finding businesses that are trading at a significant discount to their intrinsic value by employing a combination of Benjamin Graham's investment philosophy and a contrarian approach to the market and the securities therein.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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