UAE to Exit Opec, Flood Market With 5 Million Barrels Per Day

Asia's oil import-dependent economies will benefit from the United Arab Emirates' (UAE) exit from Opec, though the ongoing closure of the arterial Strait of Hormuz may not offer any immediate relief from soaring prices, analysts say.

Global oil prices continued to surge on Wednesday, with benchmark Brent crude oil prices hitting US$111 a barrel and US West Texas Intermediate (WTI) approaching US$100 a barrel. Before the Iran war, Brent was trading around US$70 a barrel, while WTI was about US$65 per barrel.

“The Strait of Hormuz closure is masking the immediate impact of this departure, but once the strait reopens, a UAE pumping freely towards 4.8 million barrels per day represents a real shift of 1 to 2 per cent of global demand,” Rystad Energy's Middle East senior vice-president Aditya Saraswat said.

The country is currently producing 3.4 million barrels a day under the Organization of the Petroleum Exporting Countries' quota-capped membership. With proven reserves exceeding 100 billion barrels, the UAE – the world's sixth-largest oil producer – is expanding capacity towards 5 million barrels per day.

“For Asia's import-heavy economies like Japan, India and South Korea, that's structurally good news on prices long-term, even if the near-term picture is painful with Asian refineries already cutting runs sharply,” Saraswat said.