First OPEC+ meeting since UAE's exit today: What to expect?
What's the story
Seven OPEC+ countries are convening today to set new oil production quotas. This is the first such decision since the United Arab Emirates (UAE) withdrew from the cartel, further fueling price pressures due to the ongoing Middle East conflict. The UAE, a major global producer, announced its exit from OPEC and expanded OPEC+ group on April 28, after dissatisfaction with their production quotas.
Departure impact
UAE's exit adds to price pressures amid Middle East conflict
The UAE's withdrawal from OPEC and the expanded OPEC+ group took effect on Friday. The move has added to the price pressures caused by the ongoing war in the Middle East. The seven countries participating in today's meeting are Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, and Saudi Arabia. Their statements will be closely monitored for any implications of this major change in membership on future oil production quotas.
Quota expectations
Market has already priced in production decision
The market has priced in the production decision from these seven countries. They are expected to raise their quotas by 188,000 barrels per day (bpd), according to Arne Lohmann Rasmussen, chief analyst at Global Risk Management. This is similar to a 206,000-barrel daily increase announced in March and April, minus the UAE's share. However, it is important to note that raising quota on paper may not have much impact on actual production as it is already short of the limit.
Output challenges
Shortfall in OPEC+ output due to war-related disruptions
Rystad Energy analyst Priya Walia noted that total OPEC+ output with quota fell to 27.68 million bpd in March, against a monthly quota of 36.73 million bpd. This is a shortfall of some nine million bpd, mostly due to war-related disruptions rather than voluntary restraint. The blockade imposed by Iran in response to US-Israeli strikes has trapped exports in the Gulf region, further impacting oil production and export levels among member countries such as Iraq, Kuwait, and Saudi Arabia.
Exit implications
UAE's exit a major development for OPEC
The UAE's exit is a major development for OPEC, Kpler analyst Amena Bakr said. The country is the fourth-largest producer in the group and has significant untapped production capacity. This could be a key factor when the group seeks to regulate the market. The UAE has raised concerns over its quotas since 2021, Bakr added, highlighting its long-standing dissatisfaction with these production limits.