UAE to leave OPEC, signaling shift towards closer ties 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 has officially exited OPEC, the Organization of the Petroleum Exporting Countries, effective Friday. This move is expected to have implications for global oil prices once the Strait of Hormuz opens.

As part of its exit, the UAE plans to increase oil production by approximately 2 million barrels per day, which could lead to lower prices on the global market. According to Adnan Mazarei, a nonresident senior fellow at the Peterson Institute for International Economics, this increased supply “will pull down some pricing pressure depending on how demand does compared to global prices.”

The UAE’s decision to leave OPEC comes amid tensions in the Middle East and the ongoing conflict between the US and Iran. The Strait of Hormuz, which accounts for 20% of global oil and gas transit, has been blocked since the start of the war, leading to increased oil prices.

Global oil benchmark Brent crude futures rose as high as $126.41 a barrel on Thursday before settling down $4.02. The average price for one gallon of petrol hit $4.33, close to double from the previous day’s price.

The US government is expected to welcome the UAE’s move, as it could lead to a decline in OPEC’s pricing power. According to Mazarei, “the US would welcome a weakening of the OPEC and OPEC+.” The US has been one of the few countries that have benefited from the current oil squeeze, with US oil and gas producers enjoying “unusual profits” since the war began.

The disruption in oil flows due to the conflict is also expected to impact other industries, such as petrochemicals. These products are used in a wide range of applications, including fertilizers, solar panels, clothing, and cosmetics, among others. The US is currently the largest oil producer and is well-positioned to take advantage of the increased supply from the UAE.

A recent poll conducted by Reuters/Ipsos found that 34% of Americans approve of President Donald Trump’s performance in the White House, down from 36% in a prior survey.

Source: Al Jazeera