From Deutsche-Welle, April 29:
The United Arab Emirates is leaving OPEC to pump more oil on its own terms. The break strips Saudi Arabia of a key partner and adds to growing uncertainty over the cartel's future.
Why has the UAE decided to quit OPEC now?
OPEC, the global cartel of oil-producing nations, operates a quota system that limits how much oil each member can produce.For years, the United Arab Emirates (UAE) has clashed with Saudi Arabia, OPEC’s most powerful member, over these quotas. The UAE has invested heavily to expand its oil industry and grow its market share, but OPEC limits have repeatedly held it back.
Energy Minister Suhail Al Mazrouei told the New York Times on Tuesday: "The world needs more energy. The world needs more resources, and [the] UAE wanted to be unconstrained by any groups."
The UAE is now betting it can sell more oil once the Iran war and Strait of Hormuz crisis ends, both in the medium and the longer term. Analysts, meanwhile, see the move as a calculated step by a producer ready to act independently.
"Losing a member with 4.8 million barrels per day of capacity, and the ambition to produce more, takes a real tool out of the group's [OPEC] hands," said Jorge Leon, head of geopolitical analysis at research consultancy Rystad Energy.
"With demand nearing a peak, the calculation for producers with low-cost barrels is changing fast, and waiting your turn inside a quota system starts to look like leaving money on the table."
The UAE, which joined OPEC in 1967 through Abu Dhabi, will leave both OPEC and the wider OPEC+ alliance, which includes Russia, on May 1.
The UAE currently produces roughly 3.2 to 3.6 million barrels per day (bpd) under quotas but holds spare capacity of nearly 4.8 million bpd, Reuters news agency reported. Plans call for a hike in output toward 5 million bpd by next year.
How does the UAE's exit weaken OPEC and Saudi Arabia’s leadership?
The UAE's exit removes one of the few OPEC members with meaningful spare oil capacity, leaving Saudi Arabia unable to easily share the burden of output adjustments.The Gulf Kingdom has traditionally managed oil prices by cutting its own production and enforcing discipline across the group. With the UAE gone, Saudi Arabia will have to rely much more on its own oil production cuts to stabilize prices.
This will make defending oil prices more expensive and less effective for Riyadh. It also weakens the Kingdom's ability to manage and discipline the wider OPEC group.
David Oxley, chief climate and commodities economist at the London-based Capital Economics research house, called the move "the thin end of the wedge," warning in an analysis its website that "the ties binding OPEC members together have loosened."....
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