UAE leaves OPEC in a big blow to the oil cartel

 UAE leaves OPEC in a big blow to the oil cartel

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The UAE is like the friend who just announced in the group chat that they’re taking their own car on the road trip. The Gulf nation announced yesterday that it’s leaving OPEC, the 12-nation oil cartel that accounts for half of global oil exports. The oil-flush nation’s abrupt departure—which it said will happen on Friday—is a huge blow to the organization that coordinates countries’ oil outputs in order to control prices. The UAE is the third largest oil producer in OPEC, after Saudi Arabia and Iraq. UAE-shaped hole OPEC has already been losing its grip on the world’s oil supply in recent years, as the US fracking revolution floods global markets with American oil. But now, its sway will be even more limited. The UAE said it’s leaving OPEC to have more freedom to decide how much oil to sell, and that it plans to gradually grow oil production as the world demands more of it: Before the closure of the Strait of Hormuz forced the country to reduce oil shipments, it produced 3.6 million barrels of oil daily, maxing out its quota. It seeks to boost production to 5 million barrels daily by 2027 by building pipelines or maximizing shipments once the strait reopens. There are likely geopolitical reasons, too: The UAE is engaged in a regional rivalry with Saudi Arabia, which is the de facto leader of OPEC. The two countries have the most oil sloshing around beyond what OPEC allows to be exported. Why now? The UAE says it made the decision to bid OPEC adieu now, amid the Iran war, when it would have the least disruptive impact, since oil prices are at multi-year highs. Looking ahead: Experts say that while OPEC losing the UAE might not suppress oil prices in the near future it might make them more volatile in the long term.