Oil Pares Drop After UAE Officials Say No Plans to Leave OPEC

Brent oil pared a sharp drop as UAE officials said there was no plan to leave the Organization of Petroleum Exporting Countries.

(Bloomberg) —

Brent oil pared a sharp drop as UAE officials said there was no plan to leave the Organization of Petroleum Exporting Countries.

The global benchmark had retreated as much as 2.8%, though later pared some of those losses to trade near $84 a barrel. The officials were responding to a Wall Street Journal report that a growing rift with Saudi Arabia meant it is having internal discussions about quitting the alliance.

The UAE has said publicly and privately it is sticking to the current OPEC output deal for at least this year. If the UAE were to quit the grouping, it would risk a political fallout not just with Saudi Arabia, one of its biggest trading partners, but with other Gulf allies such as Kuwait and Iraq.

UAE officials have for some years been contemplating what alliances best suit its long-term interests, as the country seeks to monetize recent expansion in its production capacity. In a previous OPEC+ dispute with Saudi Arabia, the group’s policy decision was held up for weeks, though in the end a compromise was found.

The flurry of headlines sparked a rare bout of oil-price volatility on Friday, with crude sharply shedding about $2, before eventually recovering to trade where futures were before the first report.

Last month in an interview with Bloomberg TV, the UAE’s Energy Minister Suhail Al Mazrouei said he wasn’t concerned about his country’s current production quota agreed with the OPEC+ alliance, though it will consider whether to seek a higher level when the group comes to discuss output for 2024. Days earlier, delegates said Russia’s partners in the OPEC+ coalition won’t boost production to fill in for cutbacks announced by Moscow.

For much of this year, oil prices have struggled to break out of a $10 range, with traders weighing a bout of interest rate hikes by the Federal Reserve against expectations of higher crude consumption led by a reopening of China’s economy. Traders largely expected OPEC production to remain stable for the rest of this year.

–With assistance from Immanual John Milton and Paul Wallace.

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