- Amid a steadily widening rift between longtime close allies Saudi Arabia and the United Arab Emirates, the latter is now considering pulling out of OPEC, the Wall Street Journal reported, citing officials anonymous emirates.
- This would have a significant impact on the global influence of the oil-producing group and allow the UAE to pursue its own oil production plans that suit its interests.
The OPEC logo is pictured at OPEC headquarters on October 4, 2022.
Joe Clamar | AFP | Getty Images
DUBAI, United Arab Emirates – The international oil benchmark, Brent, fell 2.8% on Friday morning in New York following a report that the United Arab Emirates are internally discussing the exit from OPEC , the powerful alliance of 13-member oil producers.
Brent then recouped its losses and turned positive, trading at $85.23 a barrel as of 11:30 a.m. ET, up 0.57% from the previous day.
Amid a steadily widening rift between longtime close allies Saudi Arabia and the United Arab Emirates, the latter is now considering pulling out of OPEC, the Wall Street Journal reported, citing officials anonymous emirates.
The UAE’s Department of Energy did not immediately respond to CNBC’s request for comment.
This would have a significant impact on the global influence of the oil-producing group and allow the UAE to pursue its own oil production plans that suit its interests. Abu Dhabi had for some time wanted to increase its crude output to boost revenue, but was constrained by OPEC+ production deals dominated by the group’s hub and top producer, Saudi Arabia.
United Arab Emirates Crown Prince Mohammed bin Zayed Al Nahyan (left) meets Saudi Arabia Crown Prince Mohammed bin Salman in Riyadh in July 2021.
Royal Court of Saudi Arabia | Anadolu Agency | Getty Images
The idea is not new; the UAE has reportedly debated leaving the oil alliance for years. But the topic was revived recently as disagreements with Riyadh grew, according to the Journal citing Emirati officials. The rifts have manifested themselves in the two countries’ diverging goals in Yemen’s now eight-year war, in the competition for foreign investment, and more recently in state visits – or lack thereof – that have emerged as rebuffs.
A dispute over oil production levels in July 2021 temporarily froze OPEC’s ability to present its plans to markets, pushing up crude prices.
Abu Dhabi had demanded that its own “baseline” for crude production – the maximum volume it is recognized by OPEC as capable of producing – be raised as this figure then determines the extent of production cuts and quotas he must follow in accordance with the group’s production agreements. . Members reduced the same percentage of their baseline, so having a higher baseline would allow the UAE to have a larger production quota.
The United Arab Emirates initially requested that its baseline be raised from 3.2 million barrels per day to 3.8 million barrels per day. The compromise eventually reached between Saudi Arabia and its smaller neighbor raised the UAE’s baseline to 3.65 million barrels per day from April 2022.
As the Saudi and Emirati energy ministers praised each other and touted the work of the group of oil producers, the breakup seemed like a sign of things to come as economic and geopolitical competition between the two grew.
And a potential departure of the United Arab Emirates from OPEC would rock the group, especially as it comes within four years of two previous departures: Qatar in 2019 and Ecuador in 2020.