Two experts disagree on the UAE’s withdrawal from OPEC, ranging from a price collapse to a limited impact.
Iraqi oil and economic experts have differing opinions on the repercussions of the United Arab Emirates’ withdrawal from OPEC, ranging from warnings of a sharp drop in oil prices to estimates that rule out a major impact on the global market.
Oil expert Dirgham Muhammad Ali told Shafaq News Agency that the UAE’s withdrawal could lead to an uncontrolled increase in production outside the quota system, threatening a large surplus in oil supply.
He added that any uncalculated increase in supply would lead to severe pressure on prices, potentially resulting in significant price drops or even a market collapse, especially if the commitment of the remaining countries within the OPEC+ alliance is weak.
He pointed out that the oil market is based on a balance of supply and demand, and that any disruption from a major producer such as the UAE will have direct and rapid repercussions, noting that Iraq will be among the most affected, as it depends on oil revenues for more than 90 percent of its budget.
In contrast, economist Mohammed Al-Hassani ruled out a major impact, stressing that the UAE’s withdrawal would not necessarily lead to a collapse in prices, and that its impact would be limited as long as coordination continued within the “OPEC+” alliance.
He explained that the oil market is now affected by multiple factors, including global demand, geopolitical tensions, and the ability of major countries, especially Saudi Arabia, to balance the market by adjusting production levels.
He added that the UAE may continue to coordinate informally with producers, which reduces the likelihood of a price shock, indicating that any potential decline will affect Iraq, but it will not necessarily be a sharp collapse as feared.
This debate comes at a time when global markets are watching closely to see how well producers will adhere to production control policies, and the impact of geopolitical developments on supply and demand levels.
The UAE announced that it would withdraw from the organization and would be able to determine its own production levels, effective May 1st.
The UAE is seeking higher production quotas from OPEC due to its ability to produce far more oil than it is currently allowed to produce.
Shafaq.com