Oil pares fall after UAE officials say no plans to exit OPEC

(Bloomberg) —

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Brent oil fell sharply as UAE officials said there was no plan to leave the Organization of Petroleum Exporting Countries.

The global benchmark was down as much as 2.8% but later erased some of those losses to trade near $84 a barrel. The officials responded to a Wall Street Journal report that a growing rift with Saudi Arabia meant there were internal discussions about exiting the alliance.

The UAE has publicly and privately said it will stick to the current OPEC output deal for at least this year. If the UAE left the grouping, it would risk a political conflict not only with Saudi Arabia, one of its largest trading partners, but also with other Gulf allies such as Kuwait and Iraq.

UAE officials have pondered which alliances best serve their long-term interests for a number of years as the country seeks to monetize the recent expansion of its manufacturing capacity. In a previous OPEC+ dispute with Saudi Arabia, the group’s policy decision was stalled for weeks, although a compromise was eventually found.

The flurry of headlines sparked a rare bout of oil price volatility on Friday, with Crude Oil sharply dropping about $2 before eventually rebounding to trade where futures were prior to the initial report.

Last month, UAE Energy Minister Suhail Al Mazrouei said in an interview with Bloomberg TV that he was not concerned about his country’s current production quota agreed with the OPEC+ alliance, although he would consider a higher one level when the group discusses production for 2024. Days earlier, delegates said Russia’s partners in the OPEC+ coalition would not increase production to offset cuts announced by Moscow.

The story goes on

For much of this year, oil prices struggled to break out of a $10 range as traders weighed a series of rate hikes by the Federal Reserve against expectations of higher crude oil consumption prompted by a reopening of the Chinese economy. Traders largely expected OPEC production to remain steady for the remainder of this year.

–Assisted by Immanual John Milton.

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