UAE quits OPEC, eroding oil cartel’s leverage
What happened
The United Arab Emirates on Tuesday announced it was withdrawing from OPEC and Russian-led OPEC+ on Friday, weakening the oil cartel’s leverage to set and stabilize oil prices. The UAE, which joined OPEC in 1967, is the cartel’s third-biggest oil producer, behind Saudi Arabia and Iran.
Who said what
The UAE’s exit “had been rumored as a possibility for some time, as it pushed back in recent years” against production limits enforced by OPEC to influence oil prices, The Associated Press said. In the short term, the decision “doesn’t really matter,” Semafor said, because with the “Strait of Hormuz closed, Gulf oil producers can’t hit their production targets anyway.” But “in the long term,” The New York Times said, the UAE’s move “could contribute to greater volatility” in the oil markets.
What next?
Free from the cartel’s “rigid quotas,” the UAE “gains the flexibility to aggressively increase its oil production on its own terms,” The Wall Street Journal said. Its departure could “spur more defections” from other members who have similarly “chafed at Saudi Arabia’s dominance.” This is the “beginning of the end of OPEC,” MST Financial energy analyst Saul Kavonic told the BBC.