UAE’s shock exit: An existential crisis for OPEC? An economist weighs in

本站添加: 2026-04-29

[00:00:00]So, Claudio Galimberti, chief economist at Rystad Energy, joins us for more.

[00:00:04]Now, Claudio, let's get your price outlook for oil now because UAE's exit effectively reduces OPEC's share in spare capacity. So, how's it going to affect the oil cartel's ability to coordinate supply and influence price, especially with the Iran war still ongoing?

[00:00:24]Thank you for inviting me back.

[00:00:26]I think it's a little bit too early to have a price forecast based on the UAE moving out of OPEC. And the reason is that, first of all, it just happened.

[00:00:36]And second, we don't know exactly whether OPEC will be able to withstand the basically the departure. It makes a whole lot of difference if you think about it because you may argue that the last 10 years have been the most successful period for OPEC and OPEC plus. Now, everything. So, if you if you look at what happened to the prices today, the the worst is announcement, which was one of the most consequential announcement in the oil market ever because I mean, the UAE has been part of OPEC since the 1960s.

[00:01:13]And the market did exactly nothing. The reason is that, of course, the whole oil market is still hostage to the situation in Hormuz.

[00:01:23]And as long as the you have this supply crunch going on, then the market would not react. Now, let me come to very quickly to the second the second part of the question. What's going to happen if the Strait of Hormuz normalizes? Well, with now the UAE, which is the second largest oil producer within OPEC having left, you may argue that the ability of OPEC to basically respond to the market signal, right, increasing and decreasing production will be greatly diminished.

[00:01:58]And yes, probably we are going to see more production coming from the UAE.

[00:02:04]Right now, they no no longer have OPEC quotas. Yeah, so I suppose we can only get a clearer picture after the Strait of Hormuz reopens, whenever that happens. And just to focus on the point about the UAE likely to increase production once it leaves OPEC.

[00:02:21]How much more oil realistically could the UAE add on its own? And how disruptive could that be for global pricing? Bearing in mind that its capacity is about 5 million barrels a day. And is there any scenario where this exit by the UAE is actually positive for the markets?

[00:02:42]Look, there are so many moving parts right now, starting with how long is going to take to normalize the Strait of Hormuz, assuming that we are going towards a normalization.

[00:02:53]The you correctly pointed out that their current capacity is actually 4.8 million barrels per day, close to the 5 million barrels per day you you mentioned. But they're only producing they have been producing 3.4, 3.5. Therefore, they have held a pre-war something like 1.5 million barrels a day of spare capacity. Now, the key thing to bear in mind is that that capacity is supposed to increase in the next 3 to 4 years to 6 million barrels per day. And that's probably the key reason why UAE decided right now to pull the trigger and leave the OPEC organization because they have so much spare capacity, they do not want to be constrained by the quotas. Your question is how much is this going to impact the markets? Well, as I said, there are so many variables that are moving so far, but there are a couple of things that we need to bear in mind.

[00:03:51]Through the war, we have lost and this is almost 2 months going into the war.

[00:03:56]We have lost a 600 million barrels of production.

[00:04:00]And we all also have deployed SPR at at the when all the SPR release is going to be done, it's going to be 400 million.

[00:04:10]So, so far, we will need to replace a billion barrel. But by the time everything is normalized, it's probably going to be twice as much. So, it's going to be probably 2 billion barrels.

[00:04:23]Now, how long is it going to take to refill these inventories, be it SPR or commercial? Well, it can take anywhere between two to three to four years. And that would be at the tone of something like two to three million barrels a day of additional demand. So, you see that if if you think if you think in these terms, then UAE additional capacity or additional ability to produce is actually not that disruptive in a market that for the next 2 to 3 years will need to replenish inventories at a very, very high rate. Okay. On the other side of this whole topic is what happens to OPEC, right? Does the departure of the UAE pose an existential crisis to the oil cartel? I mean, there have been departures before. You're talking about Indonesia, Qatar, Angola, Ecuador as well. I mean, what happens then to the influence that this oil cartel holds? And could other countries follow suit? Kazakhstan for one has frequently exceeded its output quota, as you know. There's been friction on on that side.

[00:05:34]What about Venezuela as well?

[00:05:39]Correct. So, you correctly pointed out that OPEC went through even worse. There was the Iran-Iraq War back in the '80s.

[00:05:47]Did it break down OPEC? No.

[00:05:50]So, I mean, OPEC has been incredibly resilient group.

[00:05:54]The problem is now we are facing the departure of number two in OPEC and number three in OPEC plus. So, it's very difficult to say whether this is going to be a fatal blow to the organization or is going to be a difficult situation that eventually OPEC is going to be able to navigate.

[00:06:15]You know, I come from from Europe. I've been living in the United States for many years, but Europe went through a major crisis 10 years ago. It was Brexit. So, people were saying, will the European Union survive Brexit? And eventually, the the group was able to to survive Brexit. So, if I was to guess, but this is just a wild guess at this point, I think that OPEC will be able to eventually survive the departure of of UAE, but it's going to be very hard because UAE is taking away 25% of spare capacity. And when it comes to OPEC, spare capacity is everything. It's the ability to increase and decrease production and respond to the market signals. Yeah. Claudio, just want to take a look at the US angle.

[00:07:03]What this means for the relationship with the US because Donald Trump has been calling for OPEC to bring down oil prices. You know, it's said OPEC has ripped off the rest of the world. So, this move by the UAE, can we take it as, you know, UAE kind of aligning itself more with the US?

[00:07:21]Well, definitely I will not contradict what my colleague Jorge Leon just said and you were broadcasting it just a few a few moments ago. We're perfectly aligned there. So, the the UAE is aligning a little bit more with the United States, where probably Saudi Arabia will stay more aligned with other countries within within the regions, but all of them are allies to the United States. There is little doubt about that. Now, the Trump administration has pushed for lower oil prices, right? But right now, in order to to get there, you need to solve the Hormuz crisis. This is by far still much more important than whatever happened after that. Even if we were to sign a deal today, it's going to take 3 to 4 months to get to the pre-war production level. And it's not a given that we will be able to get there because once you shut the wells, then you lose pressure and it's going to be it's it's always a hit and miss whether you are able to to get back to the the same level of production of before. So, before we get there, we need to solve the Hormuz crisis. All right. Claudio, this has been really eye-opening.

[00:08:31]Claudio Galimberti there, chief economist at Rystad Energy. Thanks for your time.