Consequences unclear

United Arab Emirates breaks with oil cartel OPEC

De VAE behoren tot de grootste producenten binnen de OPEC. Foto: Shutterstock

The United Arab Emirates (UAE) has decided to leave oil cartel OPEC after 60 years. The country wants to produce more oil and have more flexibility outside the cartel. The UAE is leaving OPEC from 1 May.

The move counts as a major blow to OPEC, which tries to steer the oil market and prices through production quotas. The UAE is among the biggest producers in the organisation and works closely with Russia. According to the Emirates, the decision was driven by strategic considerations and a desire to respond more flexibly to growing global energy demand. By operating outside OPEC, the country can increase its production without being bound by joint agreements. Moreover, the UAE’s departure appears to be a political boost for US President Donald Trump, who previously accused OPEC of keeping oil prices artificially high.

The decision comes at a time when the oil market is under pressure. Due to the war in the region and the blockade of the Strait of Hormuz, oil prices have risen sharply and supply has decreased. The exact impact of the decision is still unclear. “While the short-term effects may be limited due to the ongoing disruptions in the Strait of Hormuz, OPEC will structurally weaken in the longer term,” an analyst from market researcher Rystad Energy told Reuters news agency.

OPEC includes oil-producing countries such as Saudi Arabia, Iran, Iraq, Kuwait, Nigeria and Libya.

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This article was automatically translated from the Dutch language original to English (British).

Author: Nina Koelewijn

Source: MobilityEnergy.com

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