UAE Was in a Unique Position in OPEC+

The United Arab Emirates (UAE) was in a unique position in OPEC+ where its fiscal, and external, breakeven oil price was one of the lowest in the group and it had considerable spare production capacity.

That’s what James Davis, who leads FGE’s Short-Term service and crude oil production forecasting, told Rigzone, adding that “other members are not in the same situation”.

Davis also told Rigzone that the UAE leaving OPEC “is not a sign of the beginning of the end” for the group.  

Looking at how the country’s OPEC exit will affect the global oil market, Davis said UAE leaving OPEC will not have much impact on supply and demand right now, “given most of its production capacity is constrained while it sits behind the Strait of Hormuz”.

“However, it can have negative connotations further down the curve and create headwinds for long dated prices given the possibility of the UAE raising output beyond its recent OPEC+ target levels once Strait of Hormuz flow is resumed,” he added.

Davis went on to outline that, with the UAE’s exit, the OPEC+ group has lost about 10 percent of its production capacity, which he said means other members “may need to work harder to maintain market stability”.

U.S. President Donald Trump gave his opinion on the UAE’s decision to withdraw from OPEC when fielding questions from reporters in the Oval Office during a greeting with Artemis II astronauts last week.

When one reporter asked what Trump thought about the UAE pulling out of OPEC, Trump responded, “I think it’s great”.

“I know him very well, Mohamed [UAE President Sheikh Mohamed bin Zayed Al Nahyan], … [he’s] very smart and he probably maybe wants to go his own way,” he added during the greeting, a video of which was posted on the White House YouTube page.

A statement posted on OPEC’s website on Sunday revealed that Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman decided, in a virtual meeting held on May 3, to boost production by 188,000 barrels per day in June.

The meeting marks OPEC+’s first since the UAE Ministry of Energy and Infrastructure announced, in a statement posted on its X page which was translated from Arabic, that the country had made a decision to withdraw from OPEC and OPEC+, effective May 1.

“This decision aligns with the United Arab Emirates’ long-term strategic and economic vision and the evolution of its energy sector, including accelerating investment in domestic energy production, while reinforcing its commitment to its role as a responsible and reliable producer looking ahead to the future of global energy markets,” the statement on X noted.

“This decision comes following a thorough review of the United Arab Emirates’ production policy and its current and future capabilities, and in light of what national interests require and the state’s commitment to contributing effectively to meeting the market’s pressing needs, while geopolitical fluctuations continue in the near term through disruptions in the Arabian Gulf and the Strait of Hormuz, which affect supply dynamics, as fundamental trends point to the continued growth of global energy demand in the medium and long term,” it added.

“The stability of the global energy system relies on the availability of flexible, reliable, and reasonably priced supplies, and the UAE has invested to meet demand changes efficiently and responsibly, prioritizing supply stability, cost, and sustainability,” it continued.

This statement went on to note that, “following its withdrawal from OPEC, the UAE will continue its responsible role through a gradual and deliberate increase in production, in line with demand and market conditions”.

Rigzone has contacted OPEC for comment on Davis and Trump’s statements and the UAE Ministry of Energy and Infrastructure’s X post. Rigzone has also contacted the UAE Foreign Ministry for comment on Davis and Trump’s statements. At the time of writing, neither have responded to Rigzone.

According to a table accompanying the statement posted on OPEC’s website on Sunday, June’s “required production” is 10.291 million barrels per day for Saudi Arabia, 9.762 million barrels per day for Russia, 4.352 million barrels per day for Iraq, 2.628 million barrels per day for Kuwait, 1.599 million barrels per day for Kazakhstan, 989,000 barrels per day for Algeria, and 826,000 barrels per day for Oman.

A statement posted on OPEC’s website on April 5 revealed that Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman had decided to boost production by 206,000 barrels per day in May.

A table accompanying that statement outlined that “required production” in May was 10.228 million barrels per day for Saudi Arabia, 9.699 million barrels per day for Russia, 4.326 million barrels per day for Iraq, 3.447 million barrels per day for the UAE, 2.612 million barrels per day for Kuwait, 1.589 million barrels per day for Kazakhstan, 983,000 barrels per day for Algeria, and 821,000 barrels per day for Oman.

To contact the author, email andreas.exarheas@rigzone.com