The United Arab Emirates (UAE) could attract more U.S. investment after the exit from OPEC as the country would be able to produce more oil once the current Strait of Hormuz crisis ends, according to JP Morgan.
In a surprise announcement on Tuesday, the UAE said it is quitting OPEC and the wider OPEC+ alliance effective May 1, to pursue its national interests.
For years, the UAE has been working to boost its crude oil production capacity to 5 million barrels per day (bpd) by 2027, and has frequently clashed with its fellow OPEC and OPEC+ producers over quotas. The UAE has insisted that it should be allowed to actually use more of its growing spare capacity.
The UAE’s move to exit OPEC could be an assurance for investors that output quotas won’t restrain the oil-production and economic recovery of the major Gulf producer once the war is over, Barclays said in a note on Wednesday carried by Reuters.
Set OilPrice.com as a preferred source in Google .
In a Thursday note cited by Reuters, JP Morgan analysts said that the UAE’s exit from OPEC would not lead to any significant change in the immediate term because of the still blocked Strait of Hormuz that doesn’t allow Gulf producers to increase output. The closed chokepoint has actually led to massive shut-ins of oilfields across the Middle East, with losses estimated at around 10 million barrels per day (bpd) at present.
The exit of the UAE, which accounted for over 11% of OPEC’s oil production last year, would reduce the cartel’s ability to stabilize global oil markets, JP Morgan said.
With oil capacity expansion to 5 million bpd by 2027, the UAE would in theory have the ability to pump 1.5 million bpd of crude above the current levels, the investment bank added.
Barclays on Wednesday said that the UAE is set to grow its oil production faster when the current Hormuz crisis is over.
Yet, Amrita Sen, founder and director of market intelligence at Energy Aspects, told CNBC on Wednesday that the UAE’s exit doesn’t change “the ability of OPEC to influence oil prices.”
Sen argues that all OPEC Gulf producers will, like the UAE, look to pump as much as they can once the Strait of Hormuz crisis ends, whenever this happens, as they will want to restart the shut-in production and respond to the deepening global inventory drawdown.
By Michael Kern for Oilprice.com
More Top Reads From Oilprice.com
- Russia Dismisses Price War Fears Following UAE Departure From OPEC+
- Crisis-Hit Southeast Asia Looks to Sign Petroleum Security Pact
- Tankers Move from Fuel to Crude Trade as War Upends Flows
