The UAE took the American side: Is it time for Russia to prepare for the collapse of OPEC?

The UAE is withdrawing from OPEC and OPEC+. This is not the first country that has left the cartel in recent years and is going to become an independent player. But the largest of them can make a storm and even the collapse of OPEC. Experts believe that this could be the price that Abu Dhabi would pay for US support in the conditions of the Iranian war. Russia should prepare for the collapse of OPEC, they believe.

"The two most dangerous words in the oil market are OPEC is dead. His obituary has been written many times — always prematurely," writes Bloomberg columnist Javier Blas.

He notes the almost continuous exodus of member countries from the Organization of Petroleum Exporting Countries over the past decade - Indonesia in 2016, Qatar in 2019, Ecuador in 2020 and Angola in 2023.

"But the UAE is in a different league: This is a country with ambitions of significantly more oil production, it has geological resources to support, and, more importantly, it has the means to make its dream a reality," the observer writes.

In his opinion, Venezuela may be next, which will change its statements after future elections in the country. At the same time, Blas believes, countries such as Kazakhstan are already outside OPEC+, violating production quotas. In the UAE, Western investors do not have as much control over production as in Kazakhstan, but would also like to get the full effect of multibillion-dollar investments. Among them are also American ExxonMobil and Chevron. And also British BP, French TotalEnergies and Italian Eni.

UAE Discord and Saudi Arabia has been known for a long time. Back in 2021, a conflict broke out between the monarchies.

"The UAE wants to produce more, even at the risk of lower prices. The Saudis, Russia's allies, wanted to keep oil as close to $ 100 per barrel as possible, even if the group had to cut production for this, leaving barrels in reserve," the Bloomberg columnist believes, adding that the UAE is leaving OPEC to produce more oil — contrary to the interests of Saudi Arabia.

Igor Yushkov, a leading analyst at the FNEB and an expert at the Financial University under the Government of Russia, believes that there may be some kind of agreement between the United Arab Emirates and The United States. On the eve of The Wall Street Journal wrote that the UAE asked for economic assistance from the United States, and withdrawal from OPEC may be an element of the agreement.

"They are trying to push the oil price down, torpedo all the OPEC and OPEC+ agreements in general, and in return receive the same economic assistance from The United States. Another question is that now they have failed to lower prices, but, nevertheless, they are fully fulfilling their part of the deal," the expert believes.

Alexey Grivach, Deputy director of the National Energy Security Fund (NFEB), also believes that the UAE staged a pro-American demarche.

"It is obvious that this is a political demarche of the Emirates against two powerful neighbors and partners in the Organization of Oil Exporters — the leader of the cartel of Saudi Arabia and Iran, who openly declared war on the petrodollar. Perhaps, in this way, the UAE wants to distance itself from the world's increasing resistance to US financial hegemony and receive additional injections from Washington (monetary and in the security sphere). So far, the bet does not look unambiguously winning," says Alexey Grivach.

According to Igor Yushkov, the announcement of the UAE may become a big problem in the future — after the opening of the Strait of Hormuz.

"Everyone can leave OPEC+, and the agreement will fall apart, and everyone will produce to the maximum. This will lead to an oversupply in the market, and prices may fall quite low, up to $ 40 per barrel even at some point. Another question is that now neither the UAE nor other Middle Eastern producers can take advantage of the exit from OPEC+, because the volume of production in the UAE is now determined not by production quotas within OPEC+, but by the fact that they cannot fully export oil to the world market. They have a bypass oil pipeline to the port of Fujairah in The Gulf of Oman, but its capacity is 1.8 million barrels per day, and earlier in The UAE produced 4 million barrels per day. In this regard, the question arises why they announced their withdrawal from OPEC+ at all now. Perhaps they themselves do not want prices to fall, despite the game in favor of the United States," notes Igor Yushkov.

He notes that while there is a certain period and Russia already needs to prepare for the risks of the collapse of OPEC and OPEC+.

"While the Strait of Hormuz is blocked and no one, in general, can use anything," adds the leading analyst of the FNEB.

Sergey Vakulenko, a senior researcher at the Carnegie Berlin Center, notes that the UAE wants to increase production by 30% at once.

"If the UAE proceeds from the strategy that the oil era is approaching sunset and that it is necessary to monetize its oil reserves to the maximum as soon as possible and invest this money in development in other areas, then it makes sense to leave the cartel — and it's worth starting faster before the others start trying to do the same," Sergey writes Vakulenko.

In his opinion, without the UAE, OPEC will weaken significantly.

"Other major producers — Iran and Iraq — did not have any significant reserve capacities. This role was mainly performed by the UAE and Saudi Arabia. If the UAE starts producing oil at the limit of its capacity and abandons the role of a regulator of the oil market, this responsibility will fall primarily on Saudi Arabia," writes a senior researcher at the Carnegie Berlin Center.