Widening Gulf: UAE’s exit from OPEC+ set to weaken oil cartel

AMID the war in West Asia, the UAE has taken a drastic step with far-reaching ramifications. It has decided to part ways with OPEC , which comprises the Organisation of the Petroleum Exporting Countries and the bloc’s allies such as Russia. The war, now in its third month, has massively disrupted global energy supply in terms of oil production, besides laying bare tensions among Gulf nations, including the UAE and Saudi Arabia. Abu Dhabi’s ties with Riyadh — the de facto leader of OPEC — have worsened over the years due to the conflicts in Sudan, Somalia and Yemen. The UAE’s growing closeness to the US and Israel is another key factor that has hardened the battle lines in the Gulf region.

The UAE’s exit will weaken the bloc’s hold on the oil market, even as it will free Abu Dhabi from the quota regime imposed by OPEC to balance supply and demand. As an independent oil producer, the UAE will join the ranks of nations such as the US and Brazil. However, the virtual closure of shipping through the Strait of Hormuz implies that Abu Dhabi may have to wait and watch before it steps up production and exports.

The immediate challenge for the oil cartel is to keep its flock together. US President Donald Trump is set to up the ante against the bloc, whom he has accused of “ripping off the rest of the world” by inflating oil prices. He has also declared that the US may reconsider military support to the Gulf because of OPEC oil policies. The developments have opened a window of opportunity for India, which has strong energy ties with the UAE. New Delhi must play its cards deftly to capitalise on the shifting sands in the oil arena.