OPEC+ approves limited production increase after UAE departure
(Bloomberg) – Major OPEC+ nations agreed on a modest and symbolic increase in their June production quota levels, as the group sends a business-as-usual message following the surprise exit of the United Arab Emirates. Abu Dhabi at the same moment touted its own growth plans.
Seven countries led by Saudi Arabia and Russia will add 188,000 bpd next month under the agreement, which was finalized at a video conference on Sunday, OPEC said in a statement. A small increase was expected by delegates before the UAE exit. The actual restoration of those barrels will depend on the Strait of Hormuz being reopened and shuttered production being restored.
Still, the UAE reminded the world at the same time of its ambitions to boost production, a sticking point in its participation in OPEC going back years. The country’s flagship oil company ADNOC said that it’s planning to accelerate a growth plan with 200 billion dirham ($55 billion) in project awards spanning upstream and downstream operations. The expenditure was part of a bigger, already-announced program.
The UAE’s departure, which blindsided other members of the Organization of the Petroleum Exporting Countries and its partners, will further erode the group’s ability to influence oil prices that had already been waning because of years of output hikes from rival suppliers including US shale. OPEC’s statement made no mention of the UAE.
OPEC+ is formally pressing on with the process of restoring output halted several years ago, which had been in progress before the outbreak of war. OPEC+ is adjusting to the surprise loss of decades-long member the UAE, which announced its departure on April 28 and formally quit on May 1.
“OPEC+ is playing it cool,” said Jorge Leon, head of geopolitical analysis at Rystad Energy who previously worked at the OPEC secretariat. “By sticking to the same production path—just minus the UAE—it’s acting as if nothing has happened, deliberately downplaying internal fractures and projecting stability.”
One country raised the issue of the UAE’s withdrawal, and others responded by stressing the importance of the group’s cohesion, according to several delegates.
Separately, the UAE announced leaving the Organization of Arab Petroleum Exporting Countries, the organization said in a statement. OAPEC groups Arab members of OPEC and a few others including Syria and Egypt.
Symbolic move
Like its scheduled hike for May, OPEC’s move is largely symbolic because member nations in the Middle East will be unable to implement the increase unless the Strait of Hormuz—blocked by the U.S.-Israeli conflict with Iran—is reopened and exports from the Persian Gulf resume.
The UAE’s departure was the culmination of years of tensions between Abu Dhabi and OPEC’s de facto leader Saudi Arabia, over both oil policy and competition for regional influence. The UAE said last week that the Iran war created an opportunity for it to exit without significantly adding to market volatility.
While the departure has no immediate impact on immediate oil supply, it will mean that the UAE can ramp up supply as quickly as it chooses once the waterway reopens, unfettered by OPEC quotas, and could set the stage for future price wars.
OPEC+ will next meet on June 7.
