The United Arab Emirates said Tuesday that it would leave OPEC, the Organization of the Petroleum Exporting Countries, which coordinates oil output among leading energy producing nations.
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The departure from OPEC will likely lead the UAE to boosting energy output. Although with the Strait of Hormuz closed, it’s not clear how fast any increased production would be able to reach global markets.
“Following its exit, the UAE will continue to act responsibly, bringing additional production to market in a gradual and measured manner, aligned with demand and market conditions,” its state-run news agency said.
In recent years, the UAE’s oil output was the third largest in OPEC, behind only Saudi Arabia and Iraq. While Abu Dhabi had joined OPEC in 1967, the full United Arab Emirates has been a member since its creation as a sovereign nation in 1971.
“While near-term volatility, including disruptions in the Arabian Gulf and the Strait of Hormuz, continues to affect supply dynamics, underlying trends point to sustained growth in global energy demand over the medium to long term,” the UAE added in the statement posted to the website of its state-run news agency, using a name that some Arab nations use to refer to the Persian Gulf.
“The UAE withdrawal marks a significant shift for OPEC,” Rystad energy analyst Jorge Leon said. “While near-term effects may be muted given ongoing disruptions in the Strait of Hormuz, the longer-term implication is a structurally weaker OPEC.”
Meanwhile, the price of U.S. crude oil surpassed $100 per barrel for the first time since April 10, after peace talks with Iran failed to show meaningful progress.
After breaking above $100, which is seen by analysts as a resistance threshold, U.S. West Texas Intermediate crude rose to nearly $102 per barrel in early morning trading.
International oil benchmark Brent also jumped sharply in early trading, rising to nearly $113 per barrel.
On Tuesday, the nationwide average price per gallon of gasoline was $4.18, its highest level this year so far, according to AAA.
After President Donald Trump announced a ceasefire with Iran on April 7, the price of Brent plunged more than 17% by April 17, when Iran said the Strait of Hormuz was open to commercial vessels.
Once that turned out not to be the case, prices resumed climbing again.
On Saturday, Trump called off special envoy Steve Witkoff and his son-in-law Jared Kushner’s trip to Pakistan to meet with the Iran delegation, leaving in place the U.S. Navy’s blockade on Iranian ports. Iran has also threatened to stop ships trying to exit the Strait of Hormuz during this stalemate with the U.S.
On Sunday, Goldman Sachs raised its forecast for where the price of oil would likely be around by the end of the year. It also pushed back its forecast for when it expects Persian Gulf crude oil exports to normalize to the end of June. Additionally, it said it expects “a slower production recovery, with risks skewed to a more persistent supply shock and higher prices.”
After previously projecting that the price of U.S. crude oil would be around $75 during the fourth quarter, it now sees it rising to $83. It also raised its forecast for Brent by $10 to $90.
Citi also hiked its oil price forecast, predicting that Brent could rise to as high as $150 and remain at an average of $130 per barrel through the third quarter, before dropping to around $100 by the fourth quarter.
The commodities analysts at Goldman Sachs said that currently 14.5 million barrels per day of crude oil production in the Persian Gulf region have been cut off as a result of the war with Iran.
The war has also cut off jet fuel supplies. Airlines around the world have started cutting capacity in recent weeks, citing the rising price of jet fuel.
“Looking ahead to May, we expect jet demand to weaken further as airlines across Asia and Europe scale back activity,” JPMorgan Chase commodities analyst Natasha Kaneva wrote in a note Friday.
“Gasoline prices have risen far less than distillates so far, reflecting limited reliance on Gulf supply,” she added. Distillates are other refined petroleum products, such as diesel and jet fuel.
That “insulation is likely to fade,” she continued, “especially as seasonal demand strengthens into the U.S. summer driving season.”
