The Organisation of the Petroleum Exporting Countries (Opec) has lost the plot. Its heyday is gone, to the extent that even a rift amongst its oil producers did not rattle the markets. Instead, the very thought that a rift amongst Opec members would embolden the markets simply did not materialise.

In the immediate aftermath of the Saudi announcement severing all relations with Qatar, markets were seen going up by one per cent. Energy traders were quick to respond to the escalating crisis, sending Brent crude up by $1 per barrel to $50.42.

But ever since then, it is a different story altogether. Early on Monday, oil prices were off to a jumpy start in volatile trade. But soon markets began settling down. As of 8:15 am EDT on Monday, WTI Crude was down 0.73pc at US$47.31, while Brent Crude was trading down 0.82pc at $49.54. After opening at $49.87, Brent touched briefly above the $50 mark at $50.74, before dropping to below $50 again. On Friday, oil prices made modest moves looking ready to post a loss of 4pc for the week.

Qatar is the world’s largest producer of liquefied natural gas, but as far as crude oil is concerned it is one of the smallest members of the Opec.

It is not a major crude player and thus its impact on oil markets is limited. In May, Qatar’s crude output stood at 610,000 bpd.

On the contrary, the growing rift has the capacity to jeopardise the compliance level to the output deal, as Doha along with its allies — mainly Tehran and to some extent Moscow, could help in unsettling the overall Opec deal.

In the name of the larger geopolitical canvas, one could expect anything to happen. Because any lowering of oil prices at this stage would make Riyadh’s objective of getting a better value out of the intended Aramco IPO still difficult. Adversaries of Riyadh could go to any extent to make the process difficult.

Thus the crude markets do not appear nervous on account of the growing wedge within the Opec. Volatility, a measure of investor nervousness in the oil market has risen from January’s two-year lows, but at around 30pc, is still half what it was in January 2016, when Saudi Arabia cut ties with Iran when its embassy in Tehran was stormed over Riyadh’s execution of a Shia Muslim cleric, Reuters reported.

“In 15 years, I’ve never known a time when regional tensions in the Middle East were absent in the oil price in the way that they are today,” Investec portfolio manager Tom Nelson was quoted as saying. Nelson had a point. “The view is really that the oil market is oversupplied and will remain oversupplied for a long time,” he affirmed.

US output levels and not the Qatar and GCC rift was in foreplay. Oil prices settled to their lowest level in about a month Wednesday after data showed that US crude stockpiles unexpectedly climbed for the first time in nine weeks. Prices fell 5pc after data showed US inventories of crude oil and gasoline surprisingly rose last week.

Adding to concerns about supply outstripping demand, Royal Dutch Shell on Wednesday lifted a force majeure on exports of Nigeria’s Forcados crude, bringing all the country’s crude grades fully online for the first time in 16 months.

The market has also come under pressure from news of rising output from Libya, which together with Nigeria is exempt from the Opec production cuts.

“Unless data are released that make the latest inventory build appear an anomaly, oil prices are hardly likely to make any lasting recovery,” Commerzbank said in a note to its clients.

The markets are focused more on demand and supply rather than geo-political tensions.

This is a significantly changed energy world.

Published in Dawn, June 11th, 2017