Andrew England

It's a pretty big deal, actually.

Some people would say it wasn't a surprise, because as you said, the UAE has long complained about OPEC quotas restricting its ability to sell more oil.

But others are surprised that it's quite a dramatic decision that's happened now at a time when there's a global energy crisis caused by the US-Israeli war against Iran.

And it kind of immediately puts a spotlight on the UAE's relationship with its Gulf neighbour, Saudi Arabia, which is the de facto leader.

of OPEC at a time when, you know, all the Gulf states are trying to sort of manage their responses and reactions to the conflict.

So on the one hand, you can say, yes, they've been threatening it for a long time and now they've pulled the trigger.

On the other hand, you can say it's still a dramatic move.

The UAE was producing about 3.4 million barrels of oil a day before the war.

That's about 12% of OPEC's total production output.

Obviously, during the war, the UAE, like other oil producers in the Gulf, has had to significantly reduce its production because of the effective closing of the Strait of Hormuz, which has prevented tankers getting out of the Gulf and being able to ship oil.

Longer term, it's going to have a big impact.

Crucially, it has spare capacity.

That means that it can act as a swing producer, which means when there's a desire to increase global oil production, it can do that.

And so you remove that from OPEC and that immediately removes kind of one of OPEC's tools, which is to be able to kind of raise production when they want to.

Yeah, well, I mean, the UAE's argument has been that they see oil as a commodity they want to monetize whilst they can.

So sell as much oil as they can, use the funds, the petrodollars, the revenue to invest and develop the UAE and prepare for the non-oil economy.

So they've seen OPEC production quotas, which have restricted how much its members can produce, as a break on their development plans and their ambitions.

So if they move out of OPEC and they leave OPEC, in theory, once the Strait of Hormuz is reopened and the oil industry goes back to what it was in the pre-war days, they can sort of ramp up their oil production and start selling more oil.

So that serves them.

The key point here is that Saudi Arabia needs an oil price of about $100 a barrel to break even, to balance its books.