The United Arab Emirates is having an internal debate about the prospect of leaving OPEC, Emirati officials are telling the Wall Street Journal.
The decision of the UAE to leave the oil-based group that accounts for nearly 38% of the world’s total crude oil production would diminish the group’s oil price-setting powers. The uncertainty regarding the UAE’s participation in the Organization of Petroleum Exporting Countries comes as the rift between UAE and OPEC’s de facto leader Saudi Arabia appears to be widening over the war in Yemen.
Over the last year or so, the Wall Street Journal reported, relations between the two have soured, with UAE’s President Sheikh Mohammed bin Zayed al Nahyan and Saudi Arabia’s Prince Mohammed often missing events where the other was expected to be in attendance. What’s more, the WSJ has said.
But the rift actually began before that, in mid-2021, over the OPEC production cuts.—a rift that, at the time, threatened to sink the group’s entire plan for its production cuts. Some analysts at the time even believed that the disagreement between the two OPEC heavyweights could lead to a repeat of the 2020 oil price war.
Another bone of contention is the war in Yemen, where the UAE is hoping to keep its influence in the country to secure shipping routes in the Red Sea, while Saudi Arabia has been having talks with Houthi rebels—without the UAE—in hopes of ending the war. Meanwhile, the UAE has signed a security agreement with the Saudi-backed Yemeni government that allows the UAE to intervene if there is an imminent threat—and they’re looking to build a military base and runway in the Bab al-Mandeb strait—but, according to the WSJ, Saudi officials have privately objected to this agreement.
The United Arab Emirates is currently producing more than 3 million barrels of crude oil per day, and is OPEC’s third most prolific producer.
For the oil markets, an OPEC fracture would give more market clout to non-OPEC producers such as the United States, Canada, and Brazil—and crude oil purchasers such as China, India, and Japan.
The UAE has long been rumored to be in opposition to OPEC’s plans to drastically cut its crude oil production as part of its agreement with OPEC+.
By Julianne Geiger for Oilprice.com
