The United Arab Emirates said it will call on its fellow OPEC+ members to boost oil output faster, a dramatic U-turn that could set the country against fellow members of the alliance led by Saudi Arabia and Russia.
“We favour production increases and will be encouraging OPEC to consider higher production levels,” Yousef al-Otaiba, the UAE’s ambassador to Washington, said in a statement on Wednesday, which was first reported by the Financial Times.
A few hours later, Energy Minister Suhail Al-Mazrouei appeared to temper the message on Twitter, saying the UAE is committed to the OPEC+ agreement. Already signs had emerged that the ambassador’s proposal would run into opposition, as Iraq’s oil minister told Bloomberg the group is pumping enough oil and producing more could hurt the market. According to a person familiar with the situation, the UAE hadn’t consulted other OPEC+ members before the ambassador made his statement.
Saudi Arabia’s energy ministry had no immediate response. But the statement looks likely to revive tensions between the two Gulf states, traditional allies who nevertheless fell into a bitter dispute last year.
Oil prices slumped on the news, and US Secretary of State Anthony Blinken welcomed it, saying support for higher production “is an important thing to stabilise global energy markets.” It’s vital “to make sure that there remains an abundant supply of energy around the world.”
Reluctant Cartel
The Organisation of Petroleum Exporting Countries and its allies have so far resisted calls from the White House and other major oil consumers to ramp up production faster, arguing that the recent surge in prices to almost $140 a barrel in London is driven by geopolitical tensions rather than a genuine supply shortage.
Iraqi Oil Minister Ihsan Abdul Jabbar Ismaael stuck to that line on Wednesday after the comments from the UAE’s ambassador, saying there’s no need to change course.
“We think that the increases that OPEC+ has are enough to meet demand,” he said in a phone interview. “Additional releases could actually harm the market.”
At its most recent meeting, the cartel spent only 13 minutes considering the market before deciding to stick to its plan of gradual production increases. There was no discussion of the main cause of high prices — Russia’s invasion of Ukraine. It meets again on March 31.
Any proposal to increase production, especially if it were seen to be helping Western nations in their efforts to wean themselves off Russian crude, has the potential to create tensions within OPEC+. In a call last week with Saudi Crown Prince Mohammed bin Salman, President Vladimir Putin condemned any moves aimed at “politicising global energy supply.”
The UAE is “saying what Washington wants to hear, but Riyadh and Moscow will call the shots on March 31,” said Scott Modell, managing director of Rapidan Energy Group, a Washington-based consultant. “If the UAE went it alone and increased production, it would rock OPEC+ unity, a price Abu Dhabi is probably not willing to pay.”
Clash of Allies
The last time the UAE called for a change in OPEC+ output policy was July 2021, when the country was pushing for a higher individual production quota. Saudi Arabia initially rejected the proposal and the spat threatened to break apart the alliance.
Eventually a compromise was achieved, giving the UAE a more generous output limit and resulting in the group’s current plan of adding 400,000 barrels a day to the market each month. Even before Russia’s invasion of Ukraine threw commodity markets into turmoil, that had been criticised as too little by the International Energy Agency and the administration of US President Joe Biden.
Brent crude futures could surge to $240 a barrel this summer if Western countries impose wider sanctions on Russian oil exports, according to industry consultants Rystad Energy AS. The supply collapse would be the largest potential oil supply shortage since the 1990 Gulf War, when oil prices doubled, Rystad’s head of oil markets, Bjornar Tonhaugen, wrote in a note.
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