This weekend’s talks among OPEC+ nations provide the oil producer group with an opportunity to project unity after the shock departure of longtime member the United Arab Emirates.
A sub-group of OPEC+ states — now reduced by one to seven — led by Saudi Arabia has provisionally agreed a modest quota increase for June despite the UAE’s departure, a delegate said ahead of their video conference on Sunday.
With oil shipments from the Persian Gulf choked off by the Iran war, the hike for the time being is entirely symbolic. Rather than the flow of barrels, the significance of the discussions rests instead on whether the Organization of the Petroleum Exporting Countries and its partners can maintain an air of business-as-usual.
Before the UAE’s announcement, delegates were expecting a small quota hike for June in line with the previous two months. If they ratify the boost of 188,000 barrels a day — the same volume minus Abu Dhabi’s share — it would indicate their plans continue unaffected by the rupture.
The UAE’s surprise split last week after almost six decades of membership capped years of friction with the Saudis over Abu Dhabi’s ambition to deploy oil production capacity unfettered by OPEC+ quotas. It’s the most seismic of the departures to hit the coalition, and further erodes its ability to shape world oil markets, a power already frayed by competitors like US shale drillers.
Oil prices shrugged off the move, as traders remain focused on the near-closure of the Strait of Hormuz and signals from US President Donald Trump and Iran’s leadership on fraught negotiations toward ending the nine-week conflict. Brent futures settled near $108 a barrel on Friday, easing from the four-year high above $126 struck earlier in the week.
The conflict has triggered the biggest supply disruption in history, sending the cost of physical crude and products like diesel, gasoline and jet fuel soaring. That’s starting to erode consumers’ purchases, and traders warn this “demand destruction” will escalate as inventories are depleted, heightening the threat of an economic recession.
For OPEC+, the question now is whether some other countries eventually follow the UAE out the door, or — once current physical constraints on their production are removed — their patchy adherence to the group’s quotas deteriorates further.
Russia and Kazakhstan have said they’ll remain inside the alliance, and Russian Deputy Prime Minister Alexander Novak said there’s no immediate prospect of a price war, given the constraints imposed by the Iran conflict. Iraq supports remaining “under the umbrella of OPEC” for the time being, the country’s deputy oil minister said in an interview. Top OPEC+ members fought a brief but intense battle for market share in early 2020.
Still, both countries have often flouted OPEC+ limits, with Kazakhstan’s quota violations being particularly blatant, as has Iraq. Algeria firmly insists it remains committed to the organization.
War’s Fallout
While the fallout from the US and Israel’s war on Iran presented the opportune moment for Abu Dhabi to quit, people familiar with its thinking said the move also reflected differences of political vision with the Saudis and other Arab states, on issues like the war in Yemen and relations with Israel.
There was also a divergence on energy transition, one person said last week, as the Emiratis want to make use of their oil production capacity before the world’s shift away from fossil fuels causes consumption to fall.
Before the war, eight OPEC+ nations — including the UAE — had been in the process of restoring production shuttered several years ago. Last month, they agreed to continue the pattern with an increment of 206,000 barrels a day for May, even though the closure of the strait has forced Persian Gulf exporters to slash roughly 10 million barrels of daily production. Russia’s ability to ramp up production remains limited amid intensified Ukrainian attacks on its oil infrastructure.
The producers didn’t gave a detailed explanation last month as to why they chose to go ahead with such a theoretical step, though raising quotas now could be helpful once the strait reopens and exports resume.
Over the course of several monthly meetings, OPEC+ had formally agreed to restart roughly half of the second of two layers of production halted since 2023, though the actual additions were smaller than pledged as some countries technically struggled to increase, and others showed restraint to compensate for earlier overproduction.
This report is auto-generated from Bloomberg news service. ThePrint holds no responsibility for its content.