The United Arab Emirates (UAE) on Tuesday said that it would leave OPEC effective tomorrow, stripping the oil cartel of its third-largest producer, and weakening its leverage over global oil supplies and prices.
In its announcement, made via its state-run WAM news agency, the UAE said it also would leave the wider OPEC+ group, which Russia had led to try to stabilize oil prices.
“This decision reflects the UAE’s long-term strategic and economic vision, and evolving energy profile, including accelerated investment in domestic energy production,” the UAE said, adding that it would bring “additional production to market in a gradual and measured manner, aligned with demand and market conditions.”
Photo: AP
The UAE’s decision had been rumored as a possibility for some time, as it has pushed back against OPEC production quotas it felt had been too low — meaning it was not able to sell as much oil to the world as it had wanted.
“Having invested heavily in expanding energy production capacity in recent years, the bigger picture is that the UAE has been itching to pump more oil,” Capital Economics wrote in an analysis.
“The ties binding OPEC members together have loosened,” it said, particularly after Qatar withdrew from the cartel in 2019.
Regional politics are also likely at play. The UAE has had increasingly frosty relations with Saudi Arabia, OPEC’s largest producer, over political and economic matters in the Middle East, even after both came under attack by fellow OPEC member Iran during the war.
The UAE’s withdrawal from OPEC would not necessarily have any immediate effects on markets, because world oil supplies are sharply constrained by the war in Iran, which has closed off the Strait of Hormuz, a waterway through which one-fifth of global oil supplies — including much of the UAE’s — is transported.
On Tuesday, Brent crude, the international benchmark, traded above US$111 a barrel, more than 50 percent above its prewar price.
OPEC accounts for about 40 percent of the world’s oil output, but its market power had been waning in the past few years as the US ramped up production.
The UAE, which joined OPEC through its emirate of Abu Dhabi in 1967, had been producing about 3.4 million barrels of crude a day just before the US-Israeli war with Iran began on Feb. 28.
In Moscow, the Kremlin yesterday said that Russia planned to stay in OPEC+, despite the UAE decision, and said it hoped that the group would continue to operate.
Kremlin spokesman Dmitry Peskov called OPEC+ an important organization, especially during current turmoil on global markets.
“This format helps to substantially, let’s say, minimize fluctuations in energy markets and makes it possible to stabilize those markets,” Peskov told reporters.
Peskov said that Russia respects the UAE’s decision to leave and hoped Moscow’s energy dialogue with the Gulf state would continue.
Additional reporting by Reuters
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