UAE leaving OPEC on Friday: NPR

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The United Arab Emirates has announced it is leaving OPEC, the cartel representing major state-owned oil producers, on May 1.

In an announcement posted on state-owned media, the UAE wrote that the decision “reflects the UAE’s long-term strategic and economic vision and evolving energy profile, including accelerated investment in domestic energy production, and reinforces its commitment to a responsible, reliable and forward-looking role in global energy markets.”

OPEC includes major state-owned oil producers such as Saudi Arabia, Kuwait and Iran; The UAE joined the group nearly 60 years ago, just a few years after the cartel was founded. As a group, OPEC members set their oil production levels in an effort to balance oil markets and keep oil prices high enough to meet their national budgetary needs, but not so high that it hurts the economy and cuts oil demand. (If each country produced as much oil as possible, the laws of supply and demand would cause crude oil prices to fall sharply and reduce their incomes.)

In recent years, through the broader OPEC+ alliance, countries such as Mexico and Russia have also agreed to negotiate with OPEC on production levels. The United States, which does not have a state-owned oil producer, does not officially participate in OPEC negotiations, although some presidents have requested OPEC, and some American oil officials have not participated in OPEC negotiations. allegation of collusion With the cartel.

UAE’s separation from this group after years of differences. UAE has Irritated at its production limitIt is pushing to increase quotas and produce more oil, while Saudi Arabia, OPEC’s biggest producer and its dominant power, has backed off. OPEC meetings were sometimes prolonged or delayed due to this dispute.

Meanwhile, political relations between Saudi Arabia and the United Arab Emirates – once close allies – have deteriorated turned sour For reasons beyond oil. Both countries have supported opposing forces yemen And competing economically.

Tariq Alotaiba, a former government official of the United Arab Emirates recently wrote The Iran war has strengthened the UAE’s ties with partners such as the US, Europe and Israel, while its Arab neighbors have “defended, evaded and, in some cases, pressed for their own agendas, even when the states were under attack.” Several countries around the Persian Gulf have been the focus of Iranian attacks since the war began; The United Arab Emirates, which is located just across the Strait of Hormuz from Iran, has been specifically targeted.

“OPEC and OPEC+ have only been as strong as members’ willingness to hold barrels back from the market, and the UAE was one of them,” George Lyon, head of geopolitical analysis at Rystad Energy, wrote in a note emailed to NPR. “Saudi Arabia is now weighing more heavily on price stability, and the market has lost one of the few shock absorbers it has left.”

For now, the UAE – like other oil producers in the region – is limited in how much oil it can export due to reduced traffic through the Strait of Hormuz.

However, in the long term, the departure of a key member of the cartel would weaken OPEC’s ability to control the oil market.