Brent Oil Slumps After WSJ Report on UAE Debating OPEC Departure

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Brent oil fell in London after a report that the UAE is having an internal debate about leaving the OPEC producer group. 

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The global benchmark retreated as much as 2.8%, though pared some of those losses. The Wall Street Journal, citing Emirati officials, reported that a growing rift between Saudi Arabia and the United Arab Emirates means the UAE is having internal discussions about quitting the alliance, a move that could potentially leave it free to lift production. 

The UAE has said publicly and privately it is sticking to the current OPEC deal for at least this year. 

Last month in an interview with Bloomberg TV, the UAE’s Energy Minister Suhail Al Mazrouei said he isn’t concerned about his country’s current production quota agreed with the OPEC+ alliance, though it will consider whether to seek a higher level when the group comes to discuss output for 2024. Days earlier, delegates said Russia’s partners in the OPEC+ coalition won’t boost production to fill in for cutbacks announced by Moscow. 

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The UAE has for some years been contemplating what alliances best suit its long-term interests, as the country seeks to monetize recent expansion in its production capacity. In a previous OPEC+ dispute with Saudi Arabia, the group’s policy decision was held up for weeks, though in the end a compromise was found.

For much of this year, crude prices have struggled to break out of a $10 range, with traders weighing a bout of interest rate hikes by the Federal Reserve against expectations of higher crude consumption led by a reopening of China’s economy. Traders had largely expected OPEC production to remain stable for the rest of this year. 

“OPEC has been able to successfully control oil prices over the past couple of years, so if the cartel weakens, so will their handle on oil prices,” said Ed Moya, senior market analyst at Oanda.

The UAE clashed with Saudi Arabia when OPEC+ decided to reduce production last October, the Wall Street Journal wrote. It has since been privately pushing the producer group to pump more, the Journal said, citing Gulf officials. 

—With assistance from Immanual John Milton.