UAE quits oil cartel OPEC after 6 decades
What's the story
The United Arab Emirates (UAE) has quit the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+, ending a nearly six-decade-long membership. The decision was announced by the UAE, whose energy minister said it gives them "more flexibility" without obligations to these groups. The UAE had joined OPEC in 1967 and its departure leaves the cartel with 11 members.
Market implications
'Beginning of the end of OPEC'
The UAE's departure is expected to reduce OPEC's capacity by about 15%. Saul Kavonic, head of energy research at MST Financial, called it "the beginning of the end of OPEC." David Oxley, chief climate and commodities economist at Capital Economics, said while the UAE is small in terms of production (2.9 million barrels a day), its exit could lead to lower oil prices but higher volatility in future decades.
Geopolitical impact
Abu Dhabi often felt constrained by group quotas
Dr. Carole Nakhle, Chief Executive of Crystol Energy and Secretary General of the Arab Energy Club, said the decision "has been a long time in the making." She added that Abu Dhabi has often felt constrained by group quotas amid uneven compliance by some members. Kavonic also said Saudi Arabia will have to do most of the heavy lifting regarding internal compliance and market management on its own after this exit.
Supply disruption
World Bank warns about rise in energy prices
The UAE's decision comes after the World Bank warned that the Middle East conflict has caused the biggest loss of oil supply on record. Energy prices are expected to rise by about a quarter this year as a result. The closure of the key Strait of Hormuz is also impacting global energy supply, but it could take six months for shipping through this route to return to pre-war levels.