The United Arab Emirates is not considering quitting OPEC, contrary to reports in the media, according to two people with firsthand information of the situation. The UAE is debating quitting the Organization of the Petroleum Exporting Countries, according to a Wall Street Journal article from earlier.
Analysts expressed fears that the WSJ article would affect the so-called OPEC+ production reduction agreement. OPEC has the agreement with Moscow and other non-member nations as the reason why oil plummeted by as much as $2 per barrel.
“This is definitely not on the table,” a second source asserted in a talk with Reuters.
The UAE is a prominent OPEC member since Abu Dhabi is the organization’s third-largest supplier after Riyadh and Baghdad and is one of the rare countries with a sizable amount of untapped production capability.
In order to maintain the market, OPEC, Russia, and other non-member producers, collectively known as OPEC+, have agreed to reduce output by 2 million barrels per day, or around 2% of global demand this year.
The UAE made no quick formal comments. Suhail al-Mazrouei, the Emirati energy minister stated back in 2022 that the country’s intentions to increase production output did not indicate that it will quit OPEC.
After the WSJ report, the price of the benchmark Brent crude oil fell as low as 2.8% as a result of the news. Afterwards, Brent recovered its losses and started to rise; by 11:30 a.m. ET, it was trading at $85.23 per barrel, up 0.57% from the day earlier.
Abu Dhabi is considering leaving OPEC amid a progressively widening gap with its longstanding partner Saudi Arabia, according to a story in the Wall Street Journal that cited anonymous Emirati officials.
UAE in OPEC
A call for clarification from the media was not immediately answered by the UAE’s energy minister. The worldwide clout of the oil producer group would be significantly impacted by this, and the UAE would be at liberty to follow its own plans for oil and gas production that serve its objectives. Abu Dhabi has long desired to grow its petroleum output in order to enhance its earnings, but has been constrained by OPEC+ supply accords, which are presided over by the organization’s leader and top producer, Riyadh.
Abu Dhabi has apparently been debating abandoning the oil alliance for years, so the notion is not new. But, as divisions with Riyadh widened, the subject has lately come up again, according to UAE officials quoted in the Journal. The rifts have shown up in both nations’ conflicting objectives in the eight-year-old war in Yemen, in their rivalry for international finances, and more lately in state visits — or lack thereof — that have come off as missteps.
A disagreement over oil production quotas in July 2021 momentarily prevented OPEC from outlining its objectives for the markets, which led to an increase in petroleum prices.
As this number dictates the magnitude of production cutbacks and quotas it must adhere to in accordance with the group’s output agreements, Abu Dhabi had sought that its own “baseline” for crude production be boosted. As each participant subtracts the same amount from their baseline, a higher baseline would give the UAE a larger output limit.
At first, the UAE demanded that the benchmark be increased from 3.2 million to 3.8 million barrels per day. The UAE’s baseline will increase to 3.65 million barrels per day starting in April 2022 according to the deal that Saudi Arabia and its smaller neighbor finally achieved.