UAE Quits OPEC in Historic Blow to Oil Cartel Amid Iran War Energy Crisis
The United Arab Emirates announced it will withdraw from OPEC effective May 1, marking a major upheaval for the 60-year-old oil cartel. The shock departure comes as the Iran war roils global energy markets and highlights growing tensions between the UAE and Saudi Arabia over oil production quotas.
UAE's Historic Exit
The United Arab Emirates will exit OPEC on May 1, in a major blow to the cartel that coordinates production among many of the world's largest oil producers, particularly those in the Middle East. The shock announcement Tuesday comes after the UAE was the target of missile and drone attacks for weeks by fellow OPEC member Iran.
Motivations and Impact
The UAE wants higher OPEC production quotas because it has the capacity to produce much more oil than it is currently allowed to produce. The UAE said it would leave the cartel, and be able to set its own production levels, from May 1.
The United Arab Emirates' exit from OPEC this week will weaken the influence of the cartel and its leader Saudi Arabia on the oil market, a development that could prove bearish for prices over the long term. The UAE has the ambition to achieve 5 million barrels per day of capacity by 2027 and wants more freedom of action to pursue that goal, the energy minister added.
Energy Market Context
The US-Israeli war on Iran and retaliatory strikes by Tehran prompted regional unrest and splintered shipping lanes through the key strait – the route via which one fifth of global oil and natural gas supplies was previously transported. Iran's blockade on non-allied boats there and a US-led charge to stop vessels emerging from Iranian ports has caused global energy costs to spike, while trapping thousands of seafarers inside the channel.