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In a significant development, the United Arab Emirates (UAE) plans to exit the world’s largest oil alliance in May, a move that is expected to have far-reaching implications.
The UAE is currently one of the 12 member countries of the Organization of the Petroleum Exporting Countries (OPEC), a powerful consortium that collectively controls over 80 percent of the world’s confirmed oil reserves. Since its inception in 1960, OPEC has been instrumental in regulating global oil production to maximize profits for its member nations.
Tensions have been brewing within the alliance, particularly between the UAE and Saudi Arabia, due to disagreements over output restrictions. The UAE has been increasingly frustrated with these limitations, which have sparked internal conflicts.
Amidst this backdrop, some analysts suggest that global oil consumption may have already reached its zenith. As the world steadily shifts towards renewable energy sources, a decline in oil demand could lead to falling prices in the coming years. In light of this, the UAE is keen to capitalize on its oil reserves while the opportunity remains viable.
Some experts say oil consumption is likely to have reached its peak and will dwindle as the world transitions to renewable energy, meaning prices could drop in the coming years, so the UAE wants to ensure it can profit while it may.
Although Saudi Arabia is the cartel’s biggest producer, the UAE is one of the few member countries that can swiftly ramp up production, meaning OPEC could lose some market leverage.
“A structurally weaker OPEC, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilize prices,” Rystad Energy head of geopolitical analysis Jorge Leon told Associated Press.
“The net effect points to a more fragmented supply landscape and a potentially more volatile oil market over time as OPEC’s capacity to smooth imbalances diminishes.”
That said, it’s currently all academic with the Strait of Hormuz blocked. Iran – also an OPEC member – has shown the world who really has a grasp on the global oil trade.