UAE withdraws from OPEC, a major blow to the global oil producers group

The United Arab Emirates announced on Tuesday that it would be leaving OPEC. This is a major blow to the group of oil producers, as 'an unprecedented energy crises triggered by Iran war? exposes discord among Gulf countries.

Losing the UAE as a 'long-standing OPEC member' could weaken a group that has always tried to maintain unity despite internal differences over geopolitics or production quotas.

Suhail Mohamed al-Mazrouei, UAE Energy Minister, said the decision had been taken after an in-depth analysis of the energy strategies of the regional power.

When asked if the UAE consulted the de facto leader of OPEC and regional heavyweight Saudi Arabia he replied that the UAE had not raised the issue with any country.

The energy minister said, "This is a decision made after careful consideration of current and future policies relating to the level of production."

Tuesday's oil price gains were tempered by the UAE announcement.

IRAN WAR CONTROLS PRODUCTION

OPEC Gulf producers are struggling to export through the Strait of Hormuz. This is a chokepoint that connects?Iran with Oman, and through which a quarter of the world's oil and liquefied gas passes. Iranian threats and attacks on vessels have made it difficult for them.

Mazrouei stated that the UAE's decision to?leave OPEC & OPEC+ on May 1 would not have a big impact on the market due to the restrictions in the strait.

The Organization of Petroleum Exporting Countries and its allies, including Russia, are collectively known as?OPEC+. The UAE was the fourth largest producer. Before the war, they controlled almost half of the world's crude oil.

International Energy Agency reported that OPEC+'s share of global oil production fell to 44% in march from 48% in february. The oil price is expected to drop further in April, as the production shutdowns increase.

Monica Malik is the chief economist of ADCB. She said, "This opens up the UAE's global market share to increase when the geopolitical environment normalises."

She added that the exit should be a positive experience for consumers as well as for the global economy.

The UAE is one of Washington’s most important allies and a regional financial and business hub. It has pursued a assertive foreign strategy and carved out its own spheres of influence in the Middle East, Africa and Asia.

Recently, the UAE has redoubled its efforts to strengthen its relationship with Israel and the United States, with whom it opened ties through the 2020 Abraham Accords. This is especially true after being attacked during the Iran War. The UAE views its relationship with Israel is a key lever for regional power and as a channel to Washington.

Win for TRUMP

The UAE's withdrawal from OPEC is a victory for U.S. President Donald Trump who, in a 2018 speech to the U.N. General Assembly, accused the organization of "ripping off" the rest of world by inflating oil prices.

Trump has also tied?U.S. Trump has also linked?U.S. military support for Gulf oil prices. He said that while the U.S. defends OPEC, they "exploit" this by imposing high prices.

Anwar Gargash - the diplomatic advisor to the UAE president - had criticised on Monday the "Arab and Gulf Response" to the recent Iranian attacks during a session of the Gulf Influencers Forum.

A few Gulf leaders met in Saudi Arabia?on Tuesday. An official in the Gulf said the summit was to discuss how to respond to the thousands Iranian missiles and drone attacks that have been launched against their countries since the U.S., Israel and other nations began their 'war with Iran' in late February.

The UAE's OPEC withdrawal also?comes at a time when global spare capacity is hovering at historically low levels and the oil?market is becoming increasingly tight.

The UAE can fully benefit from its position as one of the lowest-cost, lowest-carbon barrel suppliers in the world by operating outside of the producer group.

Mazrouei said that the UAE had been a part of OPEC+ and OPEC for a very long time. He also noted that the UAE was a member since the 1970s. However, he stated the world will demand more energy. His country's decision, he suggested, would help to meet these needs. (Additional reporting provided by Nayera Saba and Yousef Abdallah; Writing by Michael Georgy, Editing by Aidan Lewis).

(source: Reuters)