UAE Leaves OPEC and OPEC+

OPEC has long been Saudi Arabia reducing output, and everyone else selling everything they can. They haven't had much power since the 1970s, but that they exist means they are a threat that if everyone else actually stuck to the agreement for a change.

This is the common problem for cartels: everyone has inventive to cheat on the deals made. By selling a little more than your share you get more money, while because everyone else is following along the prices are higher. (see also prisoners dilemma)

The US has long sought to erode OPEC’s ability to dictate global oil prices. The US has made massive progress in being broadly energy independent to isolate it from challenges elsewhere. The US has been a net energy exporter since 2019. Global oil pricing was always an annoying thorn in that strategy.

This is an initial but big crack in shaking up global oil markets in a way that meaningfully shifts global power dynamics.

"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, and my grandson is going to ride a camel". Sheikh Rashid bin Saeed Al Maktoum, the former Emir of Dubai.

Geopolic: A US-aligned Gulf state walking away from a Saudi/Russia-led bloc in the middle of a war, after deciding the bloc didn’t really have its back

Economic: it weakens OPEC’s pricing power in a way you might not see right away if Hormuz is closed, but it could really change the supply picture once things reopen

UAE is responsible for 12-13% of OPEC output as its third most productive member.

In 2019 Qatar left OPEC, but nobody cared because oil is less than 10% of their national fossil fuel output, which was about 2% of OPEC's oil output.

Can somebody knowledgeable help me understand why this is in the interests of the UAE? Also, seems like a moot point since the strait is closed. Why do they think it’s in their best interests, and why now?

Counterintuitively, I see modern OPEC as mostly net-positive for the West because business and government most cherish stability which OPEC helps provides (emphasis on helps).

The US is bailing out the UAE for liquify issues and this is likely a quid pro quo in return??

Some more discussion: https://news.ycombinator.com/item?id=47933983

Ok I was initially thinking this would be good for oil prices since they are leaving a cartel, but the article is saying this will just create more uncertainty. Seems we are damned if we do, damned if we don't these days.

is there a vested interest for usa and our war partner ?

Well, looks like that was the price for getting the USD swap line. Milkshake theory won't last long, just like the petro dollar.

What's a good investment vehicle for broader energy transition?

> The UAE's exit from OPEC represents a win for U.S. President Donald Trump, who in a 2018 address to the U.N. General Assembly accused the organisation of "ripping off the rest of the world" by inflating oil prices.

I can't see how it is actually a win for Trump. OPEC has mostly been a big partner with the US. They are the ones that have mandated using the dollar as the baseline currency for buying and selling OPEC oil.

The UAE's exit almost certainly signals they are planning on selling oil in other currencies (probably the Chinese yuan). It's also a sign of the UAE wanting out of the partnership it's enjoyed with the US and it's allies.

Iran lets oil traded in Yuan to navigate the Strait. OPEC sets prices in Petrodollars. What is the point of staying in OPEC then? Qatar is not part of OPEC so they were able to trade freely in Yuan.