MOSCOW, May 3 - PRIME. Seven OPEC+ countries with voluntary oil production restrictions (Russia, Saudi Arabia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman) held their first meeting following the UAE's exit from the agreement, where they approved an increase in the maximum permitted production level by 188,000 barrels per day in June.
Experts surveyed by RIA Novosti believe that the commitment of the "seven" to the unchanged strategy, despite the energy crisis arising from the situation in the Middle East and the departure of one participant, is linked to the countries' efforts to maintain their share of the global oil market during this optimal period. The reopening of the Strait of Hormuz will enable OPEC+ countries from the Persian Gulf to increase production without significantly impacting prices.
"The reopening of the Strait of Hormuz will trigger a psychological market reaction, and if you announce that you've agreed to raise quotas, it will further negatively affect prices. If you increase quotas every month, you can say: 'We will raise production because the quotas were already substantial.' This way, they aim to soften the impact on the market," said Igor Yushkov, lead analyst at the National Energy Security Fund.
Complete Energy Crisis
The active phase of the conflict between the USA and Israel with Iran, which began in late February, led to the closure of the Strait of Hormuz, a crucial route for the supply of energy resources from Persian Gulf countries. As a result, oil production in the region began to decline.
According to OPEC's April report, production in Iraq fell 2.6 times in March, down to 1.625 million barrels per day; production in Kuwait dropped 2.1 times to 1.213 million. The UAE reduced production by 1.8 times over the month, down to 1.892 million barrels per day. Saudi Arabia lowered its production by 23%, to 7.799 million barrels. The global oil market is losing 10-12 million barrels each day due to the Middle Eastern conflict, with a total of around 600 million barrels already under-delivered, noted Russian Deputy Prime Minister Alexander Novak. He has repeatedly pointed out that we are currently witnessing the largest energy crisis in 40 years, and restoring oil supplies will take at least several months.
UAE Exits the Chat
The Emirati state news agency WAM announced on Tuesday that the UAE is exiting OPEC and OPEC+ as of May 1. This decision is directly linked to the de facto closure of the Strait of Hormuz and was made with consideration of the investments made in increasing oil and gas production and in petrochemicals in the UAE, stated the country's Minister of Energy and Infrastructure, Suhail al-Mazrouei.
According to a source from one of the OPEC delegations interviewed by RIA Novosti, the organisation was not informed of the country's intentions. The UAE also did not notify Russia of its decision, reported the press secretary of the Russian President Dmitry Peskov.
Now, in essence, the UAE is not bound by any production restrictions that they adhered to under the agreement. Ahmed Bakr, head of analysis at OPEC+, estimated that the UAE could ramp up production to 4-4.2 million barrels per day within six months.
The Abu Dhabi state-owned oil company ADNOC has already announced plans to attract 200 billion dirhams (55 billion dollars) for development projects by 2028.
According to Igbal Guliyev, Dean of the Faculty of Financial Economics at MGIMO and Doctor of Economic Sciences, the exit from OPEC and OPEC+ is an important political gesture, though its immediate impact is limited due to the region living in a state of heightened turbulence.
"In the long run, this move could initiate competition for market shares and undermine the previous model of agreed restrictions. But right now, everything revolves around the Strait of Hormuz and how much investors are willing to overpay for risk," he told RIA Novosti.
Stability is a Sign of Mastery
Despite the surrounding events, OPEC+ remains committed to its strategy. The growth in the ceiling production level in June is comparable to the May increase of 206,000 barrels per day, simply excluding the share of the UAE, which announced its exit from OPEC and OPEC+ as of May 1.
The seven OPEC+ countries, in addition to the established quotas for all agreement participants, have additional restrictions. The UAE, which has exited OPEC and OPEC+, was also participating in these. From April 2025, participants will gradually abandon their restrictions, hence the necessity for monthly meetings to discuss plans for the upcoming month.
In September 2025, eight countries, including the UAE, will finish their exit from the voluntary restrictions of 2.2 million barrels per day ahead of schedule, and in October will begin a gradual withdrawal from further production cuts of another 1.65 million barrels.
According to Yushkov, OPEC+'s strategy over the past two years has been to reclaim its market share that the alliance may have lost while cutting oil production.
"Other countries outside of OPEC+ took advantage of this. Both the USA, and Guyana, and Brazil, and Canada increased their production, claiming our market shares. Now we see that OPEC+ has decided to fight for market share," noted the expert.
Energy expert Kirill Rodionov emphasised that the quota for the seven countries by the end of June will exceed the level of March 2025 by 2.94 million barrels per day, when the exit from the restrictions began.
Current geopolitical conditions allow OPEC+ to increase quotas without the threat of a sharp drop in oil prices. Rodionov did not rule out that if the acute phase of the conflict with Iran does not resolve by May, the alliance may decide to implement a similar increase in the production ceiling for July.
"The price of Brent oil is hovering around the 110 dollars per barrel mark, creating a favourable backdrop for increased quotas. The critical market factor remains the crisis around the Strait of Hormuz, while the quotas are somewhat peripheral to the attention," commented Sergey Tereshkin, general director of Open Oil Market.
Experts remind us that no actual increase in production will occur currently because, due to the conflict, the countries of the Persian Gulf are significantly lagging behind their quotas in OPEC+. The 'eight' countries (including the UAE) were producing 6.877 million barrels less than the projected level in March, which accommodates the compensation plan for previously allowed overproduction, according to calculations by RIA Novosti based on the OPEC report. "However, once the Strait of Hormuz is freed up, relevant to Middle Eastern countries, they will be able to boost production significantly, as all these months they have effectively accumulated an additional production quota," added Yushkov.
Source:
PRIME
