Leading OPEC+ nations have agreed to a minor, symbolic increase in their production quotas for June, thereby demonstrating that the group is operating as usual following the UAE’s unexpected withdrawal, Bloomberg reports.
Seven countries led by Saudi Arabia and Russia will add 188,000 barrels per day next month under an agreement reached during a video conference on Sunday, OPEC said in a statement.
Delegates had expected a small increase even before the UAE’s withdrawal. The actual restoration of these volumes will depend on the reopening of the Strait of Hormuz and the resumption of production that had been suspended. This occurred following the UAE’s withdrawal from the largest alliance of oil-producing nations.
The country’s flagship oil company, Adnoc, announced that it plans to accelerate its growth plan by allocating 200 billion dirhams ($55 billion) to projects covering operations in both production and refining and marketing.
The UAE’s withdrawal, which came as a surprise to other members of the Organization of the Petroleum Exporting Countries and its partners, will further undermine the group’s ability to influence oil prices, which were already weakening due to years of increased production by competitors, particularly U.S. shale companies.
The UAE is not mentioned in the new OPEC+ report.
The United Arab Emirates (UAE), which produces approximately 3–3.5 million barrels of oil per day, has announced its withdrawal from OPEC and the OPEC+ agreement effective May 1, according to a statement.
“This decision was made following a comprehensive review of the UAE’s production policy, as well as our current and future capacities, and is based on our national interests and our commitment to effectively helping meet the market’s immediate needs,” the UAE stated.
“Although short-term volatility, including disruptions in the Persian Gulf and the Strait of Hormuz, continues to affect supply dynamics, underlying trends point to sustained growth in global energy demand in the medium and long term,” the government emphasized.
The UAE joined OPEC in 1967 through the Emirate of Abu Dhabi.
The UAE explains its decision to leave the organization of exporting countries as an evolution of its approach, “increasing flexibility in responding to market changes while continuing to contribute to stability.”
The UAE notes that it is one of the world’s most price-competitive oil producers with a low carbon footprint. “After leaving the organization, the UAE will continue to act responsibly, gradually, and prudently, increasing production in line with demand and market conditions,” the statement said.
“With a large and competitive resource base, the UAE will continue to collaborate with partners in resource development, supporting economic growth and diversification. This decision does not alter the UAE’s commitment to global market stability or our approach based on cooperation with producers and consumers. On the contrary, it enhances the UAE’s ability to respond to changing market needs,“ the UAE noted.
The country’s government stated that during its time in OPEC, the UAE ”has made significant contributions and even greater sacrifices for the benefit of all.”
“But now is the time to focus our efforts on what our national interests and our commitments to investors, customers, partners, and global energy markets dictate,” the UAE emphasized.
The UAE will continue to invest across the entire value chain, including oil, gas, renewable energy, and low-carbon solutions to support the sustainable and long-term transformation of the energy system.
Oil prices remained in the red on Wednesday after the publication of the US Department of Energy’s weekly report on energy reserves in the country.
Commercial oil inventories in the US last week increased by 3.46 million barrels to 415.13 million barrels, the Energy Department reported. Gasoline stocks increased by 2.96 million barrels, distillate stocks decreased by 4.99 million barrels.
The cost of March futures for Brent on the London ICE Futures exchange as of 18:00 hours is $77.3 per barrel, which is $0.19 (0.25%) lower than at the close of the previous trading.
March futures for WTI during trading on the New York Mercantile Exchange (NYMEX) decreased in price by $0.36 (0.49%) to $73.41 per barrel.
Traders’ attention is still focused on the actions of US President Donald Trump, who intends to impose a 25 percent duty on imports from Canada, a major supplier of oil to the US market, starting February 1.
“The oil market continues to dance to the rhythm of Trump’s tariff orchestra, with the focus on the duties for Canada that will take effect this Saturday,” said Ole Hansen, who is responsible for commodity strategy at Saxo Bank.
Traders are also waiting for news from OPEC+. Kazakhstan’s Energy Minister Almasadam Satkaliyev said on Wednesday that a meeting at the level of OPEC+ representatives is planned in the near future to discuss, among other things, the US plans to increase oil production.
Oil prices strengthened their rebound Monday afternoon as investors assessed the outcome of last weekend’s OPEC+ meeting.
Futures on Brent crude oil for August at London’s ICE Futures Exchange rose by $1.37 (1.8%) to $77.5 per barrel by 2:24 pm.
WTI July futures traded on the NYMEX rose by $1.37 (1.91%) to $73.11 per barrel by that time.
Last Friday, Brent gained 2.5% and WTI gained 2.3%.
OPEC+ countries at a meeting in Vienna on June 4 decided to reduce oil production quotas by another 1.4 mln bpd – to 40.46 mln bpd. The states voluntarily reducing production since May by 1.66 million bpd will extend the cuts for the entire year 2024.
Meanwhile, Saudi Arabia will reduce production by an additional 1 million b/d as early as this year and will think about a possible extension of such measure every month depending on the market situation to stabilize it.
“Saudi Arabia is more active than most other OPEC members in seeking to maintain oil prices above the $80 a barrel mark because it is important to the country’s budget balance for this year,” DBS Bank analyst Survo Sarkar wrote.
Rystad Energy, a consultancy, estimates that additional production cuts by the kingdom will increase the global market deficit to 3 million bpd in July, which will support prices in the coming weeks.
OPEC in its monthly report slightly increased its estimate of oil demand in 2021 and 2022 – by 70 thousand and 30 thousand bpd, respectively, that is, the estimate of oil consumption growth in 2022 remained almost unchanged – 2.5 million bpd, to 99.58 million bpd.
According to the paper, the historical oil demand data for the fourth quarter of 2022 in the OECD countries of America and Europe were slightly lowered, while in the OECD countries of the Asia-Pacific region – slightly higher. “Similarly, oil demand in non-OECD states is revised upward due to improved economic activity in some countries and a recovery in oil demand in China following the abandonment of the COVID-19 zero distribution policy,” OPEC experts said.
The forecast of growth in global oil demand in 2023 remains largely unchanged from last month’s estimate of 2.3 million bpd, to 101.9 million bpd.
At the same time, OPEC slightly raised its forecasts in the first three quarters of 2023 and lowered it in the fourth: in Q1 2023, the forecast was raised by 20,000 bpd to 101.28 million bpd, in Q2 the estimate was raised by 70,000 bpd to 100.77 million bpd, in Q3 by 150,000 bpd to 102.14 million bpd, and in Q4 was lowered by 120,000 bpd to 103.39 million bpd.
“Oil demand growth is adjusted downward in Q1 2023 and Q2 2023 to account for the expected decline in the OECD region due to the projected slowdown in economic activity in the OECD Americas and Europe. On the other hand, non-OECD oil demand is revised upward due to improved economic activity in China following the repeal of the COVID-19 zero-distribution policy, as well as an expected improvement in oil demand in Russia,” the report said.
Preliminary data for January 2023 show that commercial oil inventories in OECD countries rose by 34.9 million barrels to 2.8 billion barrels, 147 million barrels higher than at the same time a year ago, but 75 million barrels lower than the average for the past five years and 124 million barrels below the 2015-2019 average. Meanwhile, oil inventories rose 10.5 million barrels in January. – to 1.372 billion barrels (59 million barrels lower than the 2015-2019 average) and petroleum products rose 24.5 million barrels to 1.43 billion barrels (65 million barrels lower than the 2015-2019 average).
The price of March futures on London’s ICE Futures Exchange stood at $86.28 per barrel by 7:10 a.m., down $0.38 (0.44%) from the close of the previous session. At the close of trading last Friday those contracts fell by $0.81 (0.9%) to $86.66 per barrel.
The price of WTI futures for March at electronic trades of the New York Mercantile Exchange (NYMEX) is $79.31 per barrel by that time, which is $0.37 (0.46%) below the final value of the previous session. The contract fell by $1.33 (1.6%) to $79.68 per barrel at the end of last session.
Brent was down 1.1% and WTI, down 2.4% at the end of last week.
“Oil traders are locking in profits at the end of the month and taking a wait-and-see attitude ahead of OPEC+ and Federal Reserve meetings, the outcome of which will be known on February 1, and ahead of the entry into force of the EU ban on the import of Russian oil products on February 5,” said Phil Flynn, senior market analyst at The Price Futures Group.
Meanwhile, the number of active oil rigs in the U.S. fell four units to 609 last week, oil services company Baker Hughes said. The number of gas rigs increased by the same number to 160.
