Crude oil futures are likely to witness some gains in the near term following Qatar's withdrawal from the Organization of the Petroleum Exporting Countries (Opec) in January 2019. However, analysts say the impact on prices will remain muted as the country is a small producer in the cartel.
Qatar's Energy Minister Saad al-Kaabi told a news conference on Monday that the country would withdraw from Opec on January 1, 2019. The announcement comes ahead of the meeting by Opec and its allies including Russia on December 6-7 to discuss cutting supply.
While Qatar is one of Opec's smallest oil producers, when compared to the likes of the cartel's de facto leader Saudi Arabia, it is one of the world's largest producers of liquefied natural gas (LNG). As regards oil, it produced 609,000 barrels per day (bpd) in October, nearly 2 per cent of the cartel's total production of 32.9 million bpd, according to monthly data by Opec.
"This is a positive development for crude oil prices in the short term and we expect the WTI (West Texas Intermediate) prices to reach $55.5 per barrel in the near term. However, the impact will be only in the short-term," Navneet Damani, AVP- Commodity Research, Motilal Oswal Financial Services (MOFSL).
"Brent crude oil futures are also seen reaching up to $65 a barrel during this week, while back home on the Multi Commodity Exchange, the front-month contract of crude oil may reach up to Rs 3,950 a barrel," he added.US-China deal
Oil prices soared by around 5 per cent on Monday after the United States and China agreed to a 90-day truce in their trade war, and ahead of a meeting this week by Opec that is expected to result in a supply cut.
Crude oil has not been included in the list of hundreds of products each side has slapped with import tariffs, but traders said the positive sentiment of the truce was also driving crude markets.
"The oil prices may witness some near term sharp gains with G20 meet outcome and upcoming Opec meeting. Qatar's impact will be limited," said Sandeep Joon, Senior Research Analyst at SMC Comtrade.
US WTI crude futures were at $53.41 per barrel, up $2.48 per barrel, or 4.9 per cent from their last close. International Brent crude oil futures were up $2.89 per barrel, or 4.9 per cent, at $62.35 a barrel. On the MCX, the December crude oil contract rose as much as 6 per cent to Rs 3790 per barrel so far in intra-day trade.