The United Arab Emirates has walked out of OPEC+, effective May 1. For years, Abu Dhabi has wanted to boost its production capacity to 5 million barrels per day, but the cartel’s quotas have held back its ambitions. This abrupt departure is sending shockwaves through the markets. 🛢️
🔍 What’s happening?
Alexander Novak, Russia’s Deputy Prime Minister, spoke on Thursday to reassure investors. According to him, Russia remains committed to OPEC+ alongside the organization’s remaining members. Moscow does not fear a price war despite the UAE’s surprise departure.
The UAE announced its withdrawal earlier this week to pursue its national interests, criticizing the limits imposed by the alliance. Abu Dhabi has long been working to increase its oil production capacity to reach 5 million barrels per day.
The timing is telling. At the time of writing, gold is trading around $4,623 per ounce, up 1.28% over the past 24 hours. Commodities remain volatile amid shifting geopolitical dynamics.
💡 Why does this matter?
The departure of a major producer like the UAE weakens the cohesion of OPEC+. If Abu Dhabi floods the market to gain market share, crude prices risk plummeting. For oil traders, this is a massive source of short-term volatility.
Russia’s reaction is strategic. Moscow cannot afford a price drop; its public finances depend too heavily on oil revenues. By demonstrating its loyalty to the alliance, Russia is attempting to maintain production discipline and avoid a repeat of the 2020 scenario, when prices collapsed.
📊 Our view
We’re only half-convinced. Novak’s diplomatic statements are standard fare during periods of internal crisis within OPEC+.
Historically, whenever a major member leaves the cartel or threatens to do so, other producers try to downplay the public impact. But behind closed doors, tensions are rising. The UAE accounts for about 3 million barrels per day. If Abu Dhabi actually increases its production to 5 million barrels per day without coordination, the current balance will be shattered. Saudi Arabia, OPEC’s de facto leader, will have to choose between defending prices by cutting its own output or retaliating by opening the floodgates. Our likely outlook for the next three months: extreme volatility in WTI and Brent, with a bearish bias as long as Abu Dhabi’s actual intentions remain unclear. On the European front, if oil prices fall, energy inflation will slow, and the ECB could have more room to cut rates. This is a positive for risky assets in the eurozone.
For French traders, we remain cautious on long oil positions until the situation stabilizes. Prioritize tight stops or options to limit the risk of a sharp downward gap.
✅ Key Takeaway
- The United Arab Emirates is leaving OPEC+ on May 1 to produce freely
- Russia says it will remain in the alliance and rules out any price war
- The risk of extreme volatility in crude oil remains until Abu Dhabi’s intentions are clarified
- Gold climbs to $4,623 per ounce amid tense geopolitical conditions
- Oil traders: err on the side of caution and use tight stops in the short term
What do you think? Do you believe Russia will keep its word, or are we heading toward another price war like in 2020?
🔎 See also
For more in-depth analysis, check out all our Commodities insights on ActuTrading Commodities 📈
Source: OPEC+, statements by Alexander Novak (Russian Deputy Prime Minister), OilPrice
