Analysts have commented on the impact of the UAE's exit, suggesting it significantly weakens OPEC's cohesion. The UAE Energy Minister stated that leaving OPEC would have a limited effect on the market. The sudden move by the UAE has left markets uncertain, pondering whether to trade on this bearish development. Some have questioned if the UAE's withdrawal represents a victory for former US President Trump, who previously accused OPEC of "exploiting the rest of the world" by inflating oil prices.
On April 28, the United Arab Emirates issued a statement announcing its formal withdrawal from the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ alliance, effective May 1. The UAE also stated it would gradually increase its oil production.
Following the announcement, international oil prices initially fell sharply. Prices for WTI and Brent crude dropped rapidly, with declines exceeding $2 per barrel at one point, before recovering slightly. At the time of writing, WTI crude was trading at $99.63 per barrel, while Brent crude was at $104.23 per barrel.
In its statement, the UAE said the decision to leave OPEC and OPEC+ aligns with the country's long-term strategy, economic vision, and the development direction of its energy sector. Concurrently, the UAE confirmed its intention to progressively raise oil output.
The UAE Energy Minister emphasized in the statement, "This decision was made after a careful review of our strategy in the energy sector, the petroleum industry, and other related fields. The UAE has long been a member of OPEC and OPEC+, but we believe the world will need more energy in the future."
The statement also indicated that, due to restricted passage through the Strait of Hormuz, the UAE chose the "right time" to exit and stressed that this move would not significantly impact the market.
Furthermore, the statement declared that after leaving the alliance, the UAE would continue to act responsibly. It plans to bring additional production to market in a gradual and measured manner, based on market demand and conditions. Possessing a substantial and competitive resource base, the UAE will continue collaborating with partners to develop resources, supporting economic growth and diversification.
In a related development, a report from Bloomberg News on the 28th, cited by Xinhua News Agency, indicated that a state-owned petroleum enterprise in the UAE had notified some of its long-term clients that they could collect cargoes via ship-to-ship transfer at the Port of Fujairah, located outside the Persian Gulf, in May. This suggests that some UAE oil tankers have already navigated through the Strait of Hormuz, bypassing what has been described as a "dual blockade" involving Iran and the US.
The report stated that certain long-term clients of the Abu Dhabi National Oil Company received notifications that they could collect cargoes, including Upper Zakum crude, at Fujairah Port. Upper Zakum crude is produced from the offshore Upper Zakum field and is typically loaded from the port on Zirku Island, deep within the Persian Gulf, with no pipeline connection to land.
Bloomberg News interpreted this information as meaning that tankers carrying this crude have already passed through the Strait of Hormuz. It remains unclear whether the UAE has reached an arrangement with Iran regarding this passage, and there has been no response from Iranian authorities.
The Port of Fujairah has a pipeline connecting it to the UAE's interior, but this pipeline primarily transports Murban crude. This pipeline runs 420 kilometers from the Habshan field, a main oil production area in the UAE, to Fujairah Port. It was officially commissioned in July 2012. This land-based pipeline connects the Persian Gulf to the Gulf of Oman, thereby avoiding the need to transit the Strait of Hormuz.
The Bloomberg report also noted that several UAE tankers appear to be successively transiting the Strait of Hormuz. A UAE liquefied natural gas ship was reportedly trapped inside the Persian Gulf last month but has since sailed to waters near the southernmost tip of India.
Data from various sources indicate that the UAE is highly dependent on the Strait of Hormuz for crude oil exports. Prior to the outbreak of hostilities involving Iran, the UAE exported between 1.5 million and 2 million barrels of crude oil per day through this critical chokepoint.
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