Angola exits OPEC; oil output dips in December

Brent crude oil prices averaged USD 77.54 per barrel in December, down 5.7% from November's price. On 29 December, the commodity traded at USD 77.69 per barrel, 3.7% lower than on the same day of the previous month. Prices have remained muted in January, dented by soft global demand and strong non-OPEC+ supply. On the production front, Angolan oil output lost momentum again in December, cooling to 1.12 million barrels per day (mbpd) from November’s 1.13 mbpd; the reading was below the 1.17 mbpd expected by the national oil firm. In other news, Angola announced its formal exit from OPEC on 21 December—effective 1 January 2024—making it the fourth country to depart from the group in the past decade. Following a downward revision of its 2024 OPEC quota to 1.11 mbpd in late November, Angola rejected the decision and stated its intention to produce more; soon after, the country went one step further and announced its exit.

Angola’s opposition to a lower 2024 quota was motivated by the necessity to attract new investments for the oil sector: Activity in the sector has been broadly downward-trending since 2016, driven by underfunding and maturing oilfields. In late 2020, the country proposed a Hydrocarbons Exploration Strategy for 2020–2025, which aims to increase exploration and investment. Bowing out from OPEC, therefore, may allow Angola to attract new funding and ramp up oil production: In December, Angola and China signed a reciprocal investment protection agreement as part of a larger push to encourage Chinese investment. Crude output in Angola is expected to tick up in 2024 year on year, well below the 1.44 mbpd average of the past decade; maturing fields are forecast to weigh on oil production.

EIU analysts commented on their outlook for Angolan oil production: “We expect further investment and exploration activity in Angola's oil sector in the coming years, particularly from China […]. On the back of increased activity at existing wells and with new wells coming on stream, we expect a gradual uptick in output, to 1.2m b/d in 2025, rising to 1.4m b/d in 2028. A major rise in activity or the discovery of a large well could prompt us to revise up our oil output forecasts.”

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