The United Arab Emirates announced on Tuesday that it is leaving the Organization of the Petroleum Exporting Countries (OPEC), which coordinates oil production among major energy producing countries.
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Withdrawing from OPEC will likely lead to the UAE increasing its energy production. Even with the Strait of Hormuz closed, it is unclear how quickly increased production will reach global markets.
“Post-exit, the UAE will continue to act responsibly and bring additional production to the market in a gradual and prudent manner in line with demand and market conditions,” the state news agency said.
In recent years, the UAE has become the third-largest oil producer in OPEC, behind Saudi Arabia and Iraq. Abu Dhabi has been a member of OPEC since 1967, but the United Arab Emirates as a whole has been a member since its creation as a sovereign state in 1971.
“While short-term instability, including disruptions in the Arabian Gulf and the Strait of Hormuz, continues to impact supply dynamics, the underlying trends point to sustained growth in global energy demand in the medium to long term,” the UAE added in a statement posted on its state news agency’s website, using the name some Arab countries use to refer to the Persian Gulf.
“The UAE’s withdrawal marks an important change for OPEC,” said Jorge Leon, an energy analyst at Rystad. “While the short-term impact may be limited given the continued disruption in the Strait of Hormuz, the long-term impact is that OPEC will be structurally weakened.”
Meanwhile, US oil prices exceeded $100 per barrel for the first time since April 10, as peace talks with Iran failed to show meaningful progress.
U.S. West Texas Intermediate crude rose to nearly $102 a barrel in early morning trading after breaking above $100, which analysts see as resistance.
Brent crude, the international oil benchmark, also soared in early trading, reaching nearly $113 per barrel.
The national average price for a gallon of gas on Tuesday was $4.18, the highest level so far this year, according to AAA.
After President Donald Trump announced a ceasefire with Iran on April 7, the price of Brent crude oil fell more than 17% by April 17, when Iran announced the Strait of Hormuz was open to commercial shipping.
When that turned out not to be the case, prices resumed rising again.
On Saturday, President Trump canceled a visit to Pakistan by special envoy Steve Witkoff and his son-in-law Jared Kushner to meet with an Iranian delegation, leaving the U.S. Navy’s blockade of Iranian ports in place. Iran has also threatened to block ships attempting to exit the Strait of Hormuz amid the standoff with the United States.
Goldman Sachs on Sunday raised its forecast for where oil prices will be by the end of the year. The outlook for normalization of Persian Gulf crude oil exports has also been postponed to the end of June. It also said it expects “the production recovery to be slower, with risks skewed toward more persistent supply shocks and price increases.”
The company previously expected U.S. crude oil prices to be around $75 a barrel in the fourth quarter, but it now expects them to rise to $83 a barrel. Brent’s forecast was also raised by $10 to $90.
Citi also raised its outlook for oil prices, predicting that Brent crude prices could rise as much as $150 a barrel and average $130 a barrel through the third quarter, before falling to around $100 a barrel by the fourth quarter.
Commodity analysts at Goldman Sachs said that 14.5 million barrels per day of crude oil production has now been halted in the Persian Gulf region as a result of the war with Iran.
The war also cut off jet fuel supplies. Airlines around the world have begun cutting capacity in recent weeks due to rising jet fuel prices.
“As we head into May, we expect jet demand to weaken further as Asian and European airlines reduce activity,” JPMorgan Chase & Co. commodities analyst Natasha Kaneva said in a note Friday.
“Gasoline prices have so far increased much less than distillates, reflecting limited dependence on Gulf supplies,” it added. Distillates are other refined petroleum products such as diesel and jet fuel.
“That insulation is likely to weaken as seasonal demand intensifies, especially heading into the U.S. summer driving season,” she continued.
