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Wednesday, April 24, 2024
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UAE Quietly Closes on Saudi Arabia in Oil Game

Amid Saudi Arabia’s production cuts and Russia’s oil exports to fund its Ukraine involvement, the United Arab Emirates (UAE) has been quietly gaining ground in the oil market. During an OPEC meeting in June, the UAE successfully increased its crude production quota, marking a substantial win.

The revision allows for a 200,000 barrels per day increase by 2024, reaching 3.2 million barrels. As oil prices surge, with Brent crude exceeding $80 per barrel, the UAE’s advantageous position becomes evident.

While Saudi Arabia reduces output to boost prices, the UAE’s strategy is to pump more oil during high demand, aligning with its developed private sector and the energy transition.

The UAE has showcased its prowess by securing increases in its production quota while declining output cuts. This has led to a 15% increase in oil prices, making the UAE a dominant force this summer.

This shift highlights not only the UAE’s oil market success but also underlying differences between the UAE and Saudi Arabia. As political and economic competition arises, the UAE’s growing influence underscores its geopolitical aspirations.

The two nations, once aligned on several regional policies, now diverge in their approaches to oil production and management within OPEC+.

While Saudi Arabia focuses on maintaining tighter supplies for price enhancement, the UAE seeks to capitalize on current demand by increasing production.

This reflects a fundamental difference in their strategies, with Saudi Arabia aiming to fund ambitious projects like Neom and Red Sea island developments, while the UAE prioritizes maximizing current oil revenues for a more diverse economy.

Amid these shifts, the UAE’s alignment with Russia for oil trading has strained its relationship with the US, adding another layer of complexity to regional dynamics.

The UAE’s proactive approach in gaining control over its oil production and trading strategies marks a significant development in the regional oil landscape.

However, despite the UAE’s recent successes, analysts predict that Saudi Arabia will maintain its edge in the energy market due to its massive production capacity expansion plans.

With the ability to flood the market at short notice, Saudi Arabia retains substantial leverage, a factor that no other player, including the UAE, can fully replicate.

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