MOSCOW, May 3 – PRIME. Seven OPEC+ countries with voluntary production cuts (Russia, Saudi Arabia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman) held their first meeting after the UAE's exit from the agreement, where they approved an increase in the maximum permitted production level by 188,000 barrels per day starting in June.
According to experts surveyed by RIA Novosti, the "seven's" commitment to an unchanged strategy despite the energy crisis stemming from the Middle East situation and the departure of one member is linked to countries' desire to maintain their share in the global oil market at an opportune time. Following the reopening of the Strait of Hormuz, OPEC+ nations in the Persian Gulf will be able to boost production without significantly impacting prices.
"The reopening of the Strait of Hormuz will inevitably trigger a psychological market reaction, and additionally announcing an agreement on increased quotas will negatively affect prices. If you have been raising quotas each month, you can argue: 'We will increase production because the quotas have already been substantial.' This is how they intend to cushion the impact on the market," said Igor Yushkov, a leading analyst at the National Energy Security Fund.
Complete Energy Crisis
The start of active hostilities between the US and Israel with Iran in late February led to the closure of the Strait of Hormuz, a key route for energy supplies from Persian Gulf countries. As a result, oil production in the region began to decline.
According to OPEC's April report, production in Iraq fell 2.6 times in March to 1.625 million barrels per day, while in Kuwait it decreased 2.1 times to 1.213 million. The UAE reduced its output by 1.8 times over the month to 1.892 million barrels per day. Saudi Arabia cut production by 23%, down to 7.799 million barrels. The global oil market is losing 10-12 million barrels daily due to the Middle Eastern conflict, with a total of approximately 600 million barrels already not supplied, stated Russian Deputy Prime Minister Alexander Novak. He has repeatedly noted that the world is currently experiencing the largest energy crisis in 40 years, with the restoration of oil supplies taking a minimum of several months.
The UAE Exits the Chat
The Emirati state information agency WAM reported on Tuesday that the UAE is leaving OPEC and OPEC+ effective May 1. This decision is directly related to the effective closure of the Strait of Hormuz and was made in consideration of investments in increasing oil and gas production and petrochemicals in the UAE, claimed the country's Minister of Energy and Infrastructure Suhail Al-Mazrouei.
According to a source from one of the OPEC delegations speaking to RIA Novosti, the organization was not informed of the country's intentions. The UAE also did not notify Russia of its decision, stated Russian presidential press secretary Dmitry Peskov.
Now, the UAE is no longer bound by any production restrictions that they adhered to under the agreement. The head of the OPEC+ analysis department at Kpler, Amena Bakr, estimated that the UAE could ramp up production to 4-4.2 million barrels per day within six months.
The Abu Dhabi oil and gas company ADNOC has already announced plans to attract 200 billion dirhams (55 billion dollars) for development projects by 2028.
According to Igbal Guliyev, dean of the Faculty of Financial Economics at MGIMO and a Doctor of Economic Sciences, leaving OPEC and OPEC+ is a significant political gesture, but its immediate effect is limited as the region is already in a state of heightened turbulence.
"In the long run, this move might initiate competition for market shares and undermine the previous model of coordinated restrictions. But right now, the fate of the market is determined by the Strait of Hormuz and how much investors are willing to overpay for risk," he commented.
Stability is a Sign of Mastery
Despite the surrounding circumstances, OPEC+ remains dedicated to its strategy. The increase in the maximum production level in June is comparable to May's increase of 206,000 barrels per day—except the UAE's share that has been excluded due to its exit from OPEC and OPEC+.
The seven OPEC+ countries, in addition to the established production quotas for all agreement participants, have additional restrictions. The UAE, which has exited OPEC and OPEC+, also participated in these. Starting April 2025, participants will gradually abandon their restrictions and meet each month to discuss plans for the following month.
In September 2025, eight countries, including the UAE, pre-emptively ended their exit from voluntary restrictions totaling 2.2 million barrels per day, and in October commenced a gradual withdrawal from an additional production cut of 1.65 million barrels.
According to Yushkov, OPEC+'s strategy over the past two years is to reclaim market share that the alliance may have lost while it was cutting oil production.
"Other non-OPEC+ countries took advantage of this. Both the USA and Guyana, as well as Brazil and Canada, increased production, capturing our market shares. Now we observe that OPEC+ has resolved that it needs to fight for market share," the expert noted.
Independent energy analyst Kirill Rodionov emphasized that the quota for the seven countries by the end of June will exceed by 2.94 million barrels per day the level of March 2025, when the exit from restrictions began.
He indicated that the current geopolitical conditions allow OPEC+ to increase quotas without the threat of a sharp decline in oil prices. Rodionov did not rule out that if by May the acute phase of the conflict with Iran is not resolved, the alliance might decide similarly to increase the maximum production level for July.
"The price of Brent oil is near the $110 per barrel mark, which provides a favorable backdrop for raising quotas. The key market factor remains the crisis surrounding the Strait of Hormuz, while quotas are on the peripheral of attention," commented Sergey Tereshkin, General Director of Open Oil Market. Experts remind that actual production growth will not occur right now as the conflict means countries in the Persian Gulf are significantly lagging behind their OPEC+ quotas. Thus, the “eight” countries, including the UAE, produced 6.877 million barrels less than the target level in March, accounting for the planned compensation for earlier excess production, as per calculations by RIA Novosti based on OPEC's report. "But once the Strait of Hormuz is reopened, which is relevant for Middle Eastern countries, they will be able to quickly increase production, as they have accumulated an additional quota over these months," Yushkov added.
Source:
PRIME
