The United Arab Emirates is having an internal debate about the prospect of leaving OPEC, Emirati officials are telling the Wall Street Journal.
The decision of the UAE to leave the oil-based group that accounts for nearly 38% of the world's total crude oil production would diminish the group's oil price-setting powers. The uncertainty regarding the UAE's participation in the Organization of Petroleum Exporting Countries comes as the rift between UAE and OPEC's de facto leader Saudi Arabia appears to be widening over the war in Yemen.
Over the last year or so, the Wall Street Journal reported, relations between the two have soured, with UAE's President Sheikh Mohammed bin Zayed al Nahyan and Saudi Arabia's Prince Mohammed often missing events where the other was expected to be in attendance. What's more, the WSJ has said.
But the rift actually began before that, in mid-2021, over the OPEC production cuts.-a rift that, at the time, threatened to sink the group's entire plan for its production cuts. Some analysts at the time even believed that the disagreement between the two OPEC heavyweights could lead to a repeat of the 2020 oil price war.
Another bone of contention is the war in Yemen, where the UAE is hoping to keep its influence in the country to secure shipping routes in the Red Sea, while Saudi Arabia has been having talks with Houthi rebels-without the UAE-in hopes of ending the war. Meanwhile, the UAE has signed a security agreement with the Saudi-backed Yemeni government that allows the UAE to intervene if there is an imminent threat-and they're looking to build a military base and runway in the Bab al-Mandeb strait-but, according to the WSJ, Saudi officials have privately objected to this agreement.
The United Arab Emirates is currently producing more than 3 million barrels of crude oil per day, and is OPEC's third most prolific producer.
For the oil markets, an OPEC fracture would give more market clout to non-OPEC producers such as the United States, Canada, and Brazil-and crude oil purchasers such as China, India, and Japan.
The UAE has long been rumored to be in opposition to OPEC's plans to drastically cut its crude oil production as part of its agreement with OPEC+.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More
Comments
The UAE derives a lot of benefits from being in OPEC+ prominent among them is the influence it derives from being part of the most influential player in the global oil market. However, this also means that it has to abide by OPEC’s collective decisions and its production policies.
Moreover, leaving OPEC+ to free itself from OPEC+’s production cuts doesn’t add more than 200,000 barrels a day (b/d) to its current production of 3.0 million barrels a day (mbd).
UAE’s ability to expand its production capacity whether inside or outside OPEC+ is limited. Though OPEC+ had agreed to raise UAE’s production quota to 3.5 mbd in 2021, it won’t be able to raise its production to full capacity in the foreseeable because of depleting reserves and the time it takes to develop new ones. In a nutshell, there is no benefit whatsoever for UAE leaving OPEC+.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert