DUBAI, United Arab Emirates — International oil benchmark Brent crude dropped as much as 2.8% on Friday morning in New York on the back of a report that the United Arab Emirates is internally discussing leaving OPEC, the powerful 13-member oil producer alliance.
Brent later recouped its losses and turned positive, trading at $85.23 per barrel at 11:30 a.m. ET, up 0.57% on the previous day.
Amid a gradually growing rift between longtime close allies Saudi Arabia and the UAE, the latter is now debating withdrawing from OPEC, the Wall Street Journal reported, citing unnamed Emirati officials.
The UAE’s energy ministry did not immediately respond to CNBC’s request for comment.
This would have a significant impact on the oil producer group’s global clout, as well as allow the UAE to pursue its own oil production plans that suit its interests. Abu Dhabi has for some time wanted to increase its crude output to boost its revenue but has been limited by OPEC+ production agreements dominated by the group’s kingpin and largest producer, Saudi Arabia.
The idea isn’t new; the UAE has reportedly debated leaving the oil alliance for years. But the topic has been revived recently as disagreements with Riyadh grew, the Journal cited Emirati officials as saying. The ruptures have manifested themselves in both countries’ divergent aims in the now eight-year-long war in Yemen, in competing for foreign investment, and more recently in state visits — or lack thereof — that have appeared as snubs.
A dispute over oil production levels in July of 2021 temporarily froze OPEC’s ability to lay out its plans for the markets, sending crude prices upward.
Abu Dhabi had demanded that its own “baseline” for crude production — the maximum volume it’s recognized by OPEC as being able to produce — be raised because this figure then determines the size of production cuts and quotas it must follow as per the group’s output agreements. Members cut the same percentage from their baseline, so having a higher baseline would allow the UAE a greater production quota.
The UAE initially called for its baseline to be raised from 3.2 million barrels a day to 3.8 million barrels a day. The compromise eventually reached between Saudi Arabia and its smaller neighbor raised the UAE’s baseline to 3.65 million barrels per day from April 2022.
While the Saudi and Emirati energy ministers praised each other and the work of the group of oil producers, the rift appeared to be a sign of things to come as economic and geopolitical competition between the two increase.
And a potential UAE departure from OPEC would rattle the group, especially as it comes within some four years of two prior departures: Qatar in 2019 and Ecuador in 2020.