Indonesia quits OPEC over production cut

Indonesia has quit the Organization of Petroleum Exporting Countries (OPEC) over oil production cut.

The country’s decision came less than a year after rejoining the group. As a net oil importer, Indonesia said it could not agree to OPEC’s production cuts. The decision came as the cartel agreed its first oil output cut since 2008 in a bid to tackle overcapacity and prop up prices. Analysts have argued that the suspension could be a setback for Indonesia, OPEC’s only East Asian member, which had hoped to benefit from being closer to OPEC countries when it reactivated its membership at the start of the 2016.

OPEC asked Indonesia to cut oil production by about 37,000 barrels per day (bpd), or about 5 percent of its output. Indonesia said its cut quota would dent its already slipping oil rent. Indonesia’s Energy and Mineral Resources Minister Ignasius Jonan, who attended the Vienna meeting, said the only reduction Indonesia could accept was a cut of 5,000 bpd, which had been approved in the country’s 2017 budget.

“There are still big government revenue needs in the 2017 budget,” Jonan said, adding that as a net oil importer a cut to production would not benefit Indonesia, particularly at a time when oil prices were expected to go up.

The country’s Energy and Mineral Resources Ministry said in a statement, that the temporary exit was in the best interest of all OPEC members. However, it was not clear whether Indonesia was asked to suspend its membership or if it left voluntarily.

Qatar, the current OPEC president, said on Thursday that Indonesia had been suspended. For Saudi Arabia – which took the lion’s share of cuts – a key criteria for the deal was collective action by OPEC beyond those countries, Iran, Libya and Nigeria, which were given an exemption, said Jason Gammel of U.S. investment bank Jefferies.