Following the UAE's announcement of its withdrawal from OPEC, Russian Deputy Prime Minister Alexander Novak stated on Thursday that the decision would not trigger a price war in the context of current global oil supply shortages. Concurrently, Brent crude prices surged past $124 per barrel during Asian trading hours, reaching their highest level since US military action against Iran, offering a clear market rebuttal to fears of a price war. Novak framed the situation with a rhetorical question: "How can there be a price war when there is a supply shortage?"
Novak's remarks on Thursday addressed the core market confusion directly. He questioned the logic of a price war materializing amid existing supply deficits. His argument rests on an undeniable reality: the Strait of Hormuz, a critical global oil transit chokepoint, is nearly completely blocked due to US-Iran military conflict. Novak stated plainly, "A significant amount of oil cannot reach the market today, while demand far exceeds supply." Data indicates that before the conflict, 125 to 140 vessels transited the Strait daily, but recent days have seen only 7 crossings, with no crude oil tankers among them. At least six Iranian tankers have been intercepted and turned back by US forces. This vital maritime passage, which handles approximately one-fifth of global oil trade, one-fifth of LNG trade, and nearly one-third of international fertilizer trade, is effectively shut down.
Against this backdrop, Novak conveyed two key signals. First, Russia and Saudi Arabia have not discussed the UAE's exit, and Moscow has no intention of following the UAE out of the OPEC+ alliance. Novak said the alliance is "very adept at mitigating risks in the oil market during crises," and that this cooperation "enables us to maintain strategic investment activities, industry development prospects, and regular interaction between countries." Second, despite the fissure created by the UAE's departure, the OPEC+ mechanism will remain a core influence on global oil prices as long as the cooperative relationship between Russia and Saudi Arabia remains solid.
Why does the logic of a price war fail? To understand Novak's dismissal of price war expectations, one must consider a fundamental physical reality: the willingness to increase production must be matched by the ability to do so. The UAE has long expressed dissatisfaction with OPEC's production quota system. By early 2026, the UAE's oil production capacity had reached 4.85 million barrels per day, and the Abu Dhabi National Oil Company plans to invest $15 billion to raise capacity to 5 million barrels per day by 2027. However, OPEC's quota mechanism has long restricted its production to between 3 million and 3.5 million barrels per day. While leaving the group theoretically frees the UAE, unlocking a potential production increase of over 1 million barrels per day, a critical question remains: where would the additional oil be shipped? The blockade of the Strait of Hormuz renders any production increase plans moot. The current global oil supply deficit stands at a massive 16 million barrels per day, exceeding the total shortfalls seen during the two oil crises of the 1970s. As analysts from JPMorgan noted, "As long as the Strait of Hormuz remains blocked, the UAE cannot expand exports, and increased production is impossible." JPMorgan and UBS concur that the UAE's exit will have a negligible impact on short-term oil prices.
Market data supports this view. Instead of falling on the exit news, oil prices have continued to climb, driven by persistent geopolitical tensions. Market concerns include the potential for the US to launch new military strikes against Iran, which could provoke missile retaliation from Tehran, potentially plunging the Middle East into significant geopolitical turmoil, with Iran possibly threatening critical regional subsea internet cables. On April 30 during Asian trading, Brent crude futures surpassed $124 per barrel, while WTI crude rose above $109. The previous day, Brent settled at $118.03 per barrel, marking a single-day gain of 6.08%.
Where does the real shadow of a price war lie? However, Novak's optimistic assessment does not, and cannot, eliminate deeper market anxieties about the medium to long-term outlook. S&P Global Platts offers a concerning prediction: if the UAE increases daily production by 500,000 barrels within six months, the risk of a global crude supply glut would surge, potentially driving Brent prices down sharply from current highs to below $60. Conversely, Tamas Varga, an analyst at PVM Oil Associates, warned, "If the conflict persists, we cannot rule out oil prices breaking above $150," because "alternative energy sources cannot be supplied in large quantities quickly enough to compensate for the shortage." These seemingly contradictory forecasts—one warning of a crash, the other of a spike—point to the same core conflict: the timeline for reopening the Strait of Hormuz is the single most critical variable determining oil price direction. Analysis suggests that while the 2020 price war was between Saudi Arabia and Russia, the next one could potentially be between Saudi Arabia and the UAE. But the prerequisite is that the Strait of Hormuz must first be reopened. Under this logic, the market currently exhibits a rare dual narrative: "short-term spikes" are driven by geopolitical blockade, while "medium-term crash risks" stem from the potential release of global spare capacity following the UAE's exit. Currently, global spare oil capacity exceeds 4 million barrels per day, with Saudi Arabia and the UAE holding the majority. After the UAE's departure, spare capacity becomes almost entirely concentrated in Saudi Arabia alone, significantly narrowing the market's buffer.
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