The United Arab Emirates has officially confirmed its withdrawal from OPEC and OPEC+, a move that could affect the balance of power in the global oil market. RIA Novosti spoke with Anastasia Levchenko, Researcher at the Gaidar Institute’s Industrial Organization and Infrastructure Economics Department, about the possible consequences of this decision.
According to the expert, the decision itself seems unexpected, but the conditions leading to it have been developing for a long time amid a decline in the stability of agreements within the alliance.
“The UAE’s withdrawal from OPEC seems quite unexpected, although the uncertain prospects for the OPEC+ deal, as well as for OPEC itself, have been discussed for a long time. The oil production quotas introduced under OPEC+ were not fully adhered to by all participants, and competition from other players was growing, which could have led to a loss of market share for member countries in the global market, while the goal of curbing price declines would still not have been fully achieved,” noted Anastasia Levchenko.
She added that discussions regarding the effectiveness of the quota mechanism within OPEC+ had been ongoing for quite some time, but in practice, only a gradual increase in permitted production volumes had been observed previously.
According to Anastasia Levchenko’s estimates, the UAE accounts for about 4% of global oil production and leaving the organization theoretically gives the country more freedom to ramp up production. This could put upward pressure on global prices by increasing supply, though the immediate impact may be limited by geopolitical factors, including risks related to the Strait of Hormuz.
Separately, the expert highlighted the potential consequences for the entire alliance. In her view, the UAE’s decision could become a factor exacerbating instability within OPEC+ and potentially affect its future cohesion
In such a scenario, the increase in global oil production could be more significant, and competition among exporters could become fiercer. This, in turn, could lead to a decline in global oil prices. However, in the short term, the situation will continue to be constrained by geopolitical tensions in the Middle East, which are limiting supplies from a number of market participants.
In summary, Anastasia Levchenko emphasized that at present, “the level of uncertainty in the global oil market has reached new heights.”