Oil prices volatile as report says UAE mulls OPEC exit

Dubai, United Arab Emirates – International Petroleum Benchmark Brent crude oil Shares in New York fell 2.8% Friday morning on reports that the United Arab Emirates was discussing internally withdrawing from the Organization of the Petroleum Exporting Countries, the powerful 13-member coalition of oil producers.

Brent later pared losses and turned positive, trading at $85.23 a barrel by 11:30AM ET, up 0.57% from the previous day.

Amid a deepening rift between longtime close allies Saudi Arabia and the United Arab Emirates, which is now discussing quitting OPEC, Wall Street Journal reportsciting an unnamed UAE official.

The UAE’s energy ministry did not immediately respond to CNBC’s request for comment.

This will have a major impact on the global influence of the oil producing bloc and allow the UAE to implement oil production plans that are in its interest. Abu Dhabi has for some time hoped to boost crude oil output to boost revenues but has been constrained by the OPEC+ production pact dominated by the group’s anchor and top producer, Saudi Arabia.

The idea is not new; the UAE has reportedly been arguing for years about leaving the oil union. But the Wall Street Journal, citing Emirati officials, said the topic had recently resurfaced amid growing rifts with Riyadh.The rupture has manifested itself in The goals of the two countries are different During the eight-year war in Yemen, Competition for foreign capitaland recent snubs during state visits (or lack thereof).

A Controversy over oil production levels A temporary freeze in July 2021 on OPEC’s ability to formulate market plans led to higher crude prices.

Abu Dhabi has asked to raise its own crude oil production “benchmark” – the maximum output recognized by OPEC – because that figure then determines the size of the cuts and the quotas it must abide by under the group’s output agreement. Members start from their baseline The same percentage was cut in 2019, so having a higher baseline would give the UAE a larger production quota.

The UAE initially asked to raise its benchmark to 3.8 million barrels per day from 3.2 million barrels per day. The final compromise between Saudi Arabia and its smaller neighbor raised the UAE’s benchmark to 3.65 million barrels per day from April 2022.

While Saudi and UAE energy ministers praised each other’s and the oil-producing bloc’s work, the differences appeared to be omen As the economic and geopolitical competition between the two countries intensifies.

The possible departure of the UAE from OPEC would unsettle the group, especially in about four years after two previous exits: Qatar in 2019 and Ecuador 2020.