Following the United Arab Emirates’ surprise withdrawal from OPEC+, seven leading member countries have increased their oil production quotas. Saudi Arabia, Russia, and five other major oil-producing nations in the Organization of the Petroleum Exporting Countries and its Partners (OPEC+) will produce an additional 188,000 barrels per day in June, the organization announced on its website on Sunday. However, whether this target can be practically implemented is considered questionable due to the fallout from the Iran nuclear deal.
The increased production is based on the “shared commitment to supporting the stability of the oil market,” the OPEC+ countries explained. The increase in the production quota had already been anticipated.
In its statement, OPEC+ did not address the fact that the United Arab Emirates had unexpectedly withdrawn from the program on May 1. This reveals tensions with Abu Dhabi, expert Jorge León of the consulting firm Rystad Energy told AFP. By continuing with its current course on oil production, the organization is attempting to gloss over its internal rifts and project an image of stability. The organization wants to send the message that the UAE’s withdrawal will not affect its strategy.
Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman have committed to the new oil production quota. However, it is unlikely that the new quota can be achieved in practice, even on paper.
Finally, the most important oil production facilities of OPEC+ are located in the Gulf region. Their exports are hampered by Iran’s ongoing blockade of the Strait of Hormuz. According to Rystad Energy, the OPEC+ countries, which have pledged to adhere to production quotas, produced approximately nine million barrels of oil less per day in March than they had agreed.
Russia benefits most from the restricted oil exports and the resulting rise in oil prices. However, due to the consequences of its war against Ukraine, Russia is also struggling to meet its production quotas.
The United Arab Emirates (UAE) unexpectedly announced its withdrawal from OPEC+ on Tuesday, effective May 1, amid the energy crisis. The country had been a member of the organization since 1967. “During our time in the organization, we have made significant contributions and even greater sacrifices for the benefit of all,” the state-run Emirati news agency WAM quoted from a statement. However, it is now “time to focus our efforts on what is in our national interest.”
With its withdrawal from OPEC, the UAE can now independently determine the production volume and price of its oil. The country does not want to be “restricted by quotas” once the market situation has normalized, according to sources close to the Ministry of Energy in Abu Dhabi.
On Sunday, the state-owned Emirati oil company Adnoc announced plans to invest the equivalent of approximately €46.45 billion in new projects over the next two years. The company stated that this investment will accelerate its growth. The Emirates are thus positioning themselves as a significant competitor to the OPEC+ countries.
The organization also faces the risk of other countries leaving. Kazakhstan and Iraq, for example, have frequently been criticized for exceeding their OPEC+ quotas.
AFP translated by Blackout News