UAE to leave OPEC amid shift towards greater cooperation with the US

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United Arab Emirates to Supply More Oil Than Quota, Potential Impact on Global Prices

The United Arab Emirates (UAE) has officially exited OPEC, the Organization of the Petroleum Exporting Countries, which took effect on Friday. This move has been anticipated for some time and is expected to have implications for global oil markets.

As a non-OPEC member, the UAE has historically produced more oil than its allocated quota. The country’s decision to increase production further could lead to increased supply and potentially lower prices once the Strait of Hormuz opens again. The strait, which handles 20% of the world’s oil and gas exports, is currently blocked due to tensions in the region.

Experts predict that the UAE’s exit from OPEC will lead to increased competition in the energy market, raising questions about governance and cooperation in the region. Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, noted that “the timing of this move is unexpected, but it has been brewing for some time.”

The global oil benchmark Brent crude futures rose to $126.41 per barrel on Thursday before settling down $4.02. The average price for one gallon of petrol also increased, with prices close to double those from a week ago.

US officials are expected to welcome the UAE’s move, as it could curb OPEC’s pricing power and reduce pressure on global oil markets. Adnan Mazarei, nonresident senior fellow at the Peterson Institute for International Economics, stated that “the US would welcome a weakening of OPEC’s ability to set prices.”

The disruption in oil flows due to tensions in Iran has strengthened the US role as the largest oil producer. The country is also benefiting from increased demand for oil and gas, which has led to “unusual profits” for US oil and gas producers.

As the war in Iran continues, the UAE’s decision to increase production could lead to a decrease in prices once the Strait of Hormuz opens again. This could have implications for the US petrochemical sector, which relies heavily on oil imports.

Source: Al Jazeera