UAE departure raises questions about OPEC’s future impact

The UAE’s decision to exit OPEC+ may chip away at the bloc’s influence over the oil market, but analysts say it probably won’t topple the 65-year-old organization anytime soon.

The immediate impact is likely to be more limited because the Iran war is already disrupting flows, but over time, the move could weaken OPEC+’s ability to manage production and stabilize prices.

“This exit is not about oil. It is about what oil revenues can build when they are freed from collective constraints,” Karan Gupta, a Director and strategic advisor at EY-Parthenon in Dubai, told The Circuit. It is about positioning the UAE as a strategic partner of choice for the world’s most consequential economies.”

Despite the change, Saudi Arabia and other core members are expected to keep the alliance intact, though the group may become less cohesive going forward. Outside the group, the UAE will have more flexibility to increase output without quota limits, allowing it to expand production capacity and compete for market share.

Once shipping access through the Strait of ​Hormuz is restored, the UAE will no longer be bound by OPEC+ production quotas and ​could gradually raise output, HSBC said in a research note. The bank estimates that ADNOC could lift production ‌to ⁠more than 4.5 million barrels per day, compared with an OPEC+ quota of about 3.4 million bpd for the May 2026 period.

“Signals have been there since Mohamed bin Zayed Al Nahyan became president of the UAE. His agenda made it clear that the country aims to reach 5 million barrels per day of production by 2030,” said Mirco Neri, CEO and Dubai-based Co-Founder of Anvik Capital.

Among the factors that led to the UAE’s leaving OPEC were the continuous missile barrages from Iran, even though it belonged to the organization.

“The fact that a founding member’s aggression against UAE shipping and infrastructure has contributed to another member’s departure after nearly six decades tells you everything you need to know about OPEC’s internal coherence today,” Gupta said.

The UAE’s action may also signal to other members that they should rethink their place in the group, Kristin Diwan, a Senior Resident Scholar at the Arab Gulf States Institute, told The Circuit.

“I expect Emirati anger over what they see as a lack of leadership from Saudi Arabia in the Iran crisis has led them to value political accommodation less,” Diwan said. The UAE “will openly pursue their own regional strategy, based on their ties to Israel and the U.S., and are willing to break their connections to Arab and Islamic organizations, which they see as ineffective.” 

OPEC may not collapse, but its authority is gradually eroding and supply quotas are becoming harder to enforce, said Amena Bakr, Head of Middle East and OPEC+ Insights, at data intelligence firm Kpler.

“The group has been a force of stabilization and is needed to avoid constant boom and bust cycles and ensure that investment remains in the upstream sector,” Bakr said. “I don’t think this marks the collapse of OPEC. The group will evolve from here.”

Kuwait suspends oil contracts again as Strait remains blocked

Kuwait has extended a force majeure declaration that now covers about 2 million barrels a day of crude and refined products as the Strait of Hormuz shutdown blocks tanker traffic.

The move lets state-owned Kuwait Petroleum Corp. suspend delivery obligations it can’t meet under current conditions. This isn’t new – KPC had already declared force majeure earlier in the conflict – but the latest notice expands it across the country’s export system as disruptions drag on, Bloomberg reports.

The bottom line is that Kuwait can’t load or ship oil, cutting off flows worth roughly $150 million to $180 million a day at current prices and throwing delivery schedules into disarray.

While other Gulf producers are also dealing with export disruptions, Kuwait is especially vulnerable because almost all of its oil has to pass through Hormuz, with few alternative routes.

Kuwait has suffered repeated hits to its oil infrastructure, and output is now at levels last seen in the early 1990s after the Iraqi invasion. The latest notice to customers, which was delivered late last week, takes into account that full operations will take time to recover once hostilities ease, according to Bloomberg.

Saudi Arabia repairs East-West oil pipeline after war damage

Saudi Arabia has restored its East-West oil pipeline to full capacity after damage linked to the Iran conflict disrupted flows across the kingdom.

Repairs to the pipeline, which runs from oil fields in Saudi Arabia’s Eastern Province to the Red Sea port of Yanbu, were completed after attacks reduced throughput, making the desert route a critical alternative that allows exports to bypass the Strait of Hormuz.

The restoration adds about 7 million barrels back to state-owned Saudi Aramco’s daily oil shipments, strengthening its ability to fulfill orders to global markets even as security risks persist in Gulf shipping lanes.

Meanwhile, Saudi Arabia’s crude shipments to China are set to drop by about half next month to roughly 20 million barrels, down from around 40 million in April, Bloomberg reports.

The decline reflects sharply higher official selling prices and constrained export routes, with some cargoes rerouted via the East-West pipeline to the Red Sea.

Hormuz alternatives give oil not a ‘smidgen’ of help, Kuwaiti says

Kuwait Petroleum Corp. CEO Sheikh Nawaf Al-Sabah says emergency measures aimed at offsetting the Iran war’s impact on oil shipping have not raised supplies “even a smidgen” to the level of normal exports.

Speaking in Houston at the annual CERAWeek energy conference, Al-Sabah said Iran is “holding the world’s economy hostage” through its attacks on infrastructure and choking off of the Strait of Hormuz.

Iran has struck Kuwait’s largest oil refinery, as well as the Shah gasfield in the UAE and Qatar’s Ras Laffan industrial hub in response to the bombing campaign by the U.S. and Israel over the past month.

On the other hand, JPMorgan CEO Jamie Dimon said in Washington that the Iran war could ultimately bring calm to the region, saying he sees the possibility that, “in the long run, this actually enhances the chance of peace in the Middle East.”

Dimon cautioned, however, that the risks remain severe in the near term, warning of potential terrorist activity and cyberattacks that could spill into global markets, speaking in an onstage interview at the Hill and Valley Forum in Washington, D.C.

Energy agency weighs record oil release as Iran tensions mount

Governments around the world are scrambling to contain the escalating shock to energy markets from the Iran war, with oil traders tracking disruptions to Gulf exports and tanker traffic as officials weigh emergency measures to stabilize supplies.

Officials from the International Energy Agency are discussing what could be the largest coordinated release of strategic oil reserves in history – about 300 million to 400 million barrels – far exceeding the 182 million barrels released in 2022 after Russia’s invasion of Ukraine, Bloomberg reports.

Saudi Arabia, the UAE and other Gulf producers are assessing how much crude they can continue exporting as tanker insurers and shipping companies review the risks of operating in the region.

Many cargoes have been delayed and freight rates for vessels willing to enter the Gulf have surged as the conflict intensifies.

At the same time, officials are studying whether alternative routes – including Saudi pipelines that bypass the Strait of Hormuz and export terminals on the Red Sea – can help keep oil moving if shipping disruptions worsen, The Wall Street Journal reports.

The U.S. and its allies are also discussing naval measures to safeguard commercial traffic through the Gulf.

Energy traders say the combination of possible supply outages, tanker disruptions and a record emergency stockpile release has turned the oil market into a day-to-day calculation of how quickly governments can offset the barrels at risk from the conflict.

Iran crisis sparks farm chemical crunch, threatening food supplies

It’s not just oil. War with Iran is also making a range of chemicals critical for food production more expensive, including fertilizer components like urea and ammonia, Bloomberg reports.

The Middle East is the source of some 45% of the global urea supplies, which cannot be stored for long periods.

That means logistical disruptions such as the shutdown of the Strait of Hormuz can quickly tighten the market and send prices soaring.

Western sanctions have curtailed imports of Russian fertilizers, while China has imposed export restrictions to protect domestic demand and support its farming sector, the news agency said. 

Oil tanker daily rates hit $200,000 with Middle East tensions rising

Oil tanker shipping costs urged to their highest level in six years as traders scramble for vessels amid rising Middle East exports and mounting geopolitical tensions, with Saudi shipping giant Bahri moving to expand its fleet.

Daily rates for very large crude carriers, known as VLCCs, on the key Mideast route to Asia have more than tripled this year to approach $200,000, while crude prices themselves have climbed to a six-month high, reflecting tight vessel supply and stronger demand for oil shipments.

The spike has been fueled in part by India and other Asian buyers increasing purchases of Middle Eastern crude as they reduce reliance on Russian supplies, prompting Bahri to snap up additional ships to capitalize on the expanded market.

In his State of the Union address on Tuesday night, President Donald Trump warned Iran against further escalation in the region, heightening market concerns about potential disruptions to oil flows.

Additional upward pressure on freight costs has come from stronger Chinese oil demand, which is tightening tanker availability, while Iranian officials have renewed threats to the Strait of Hormuz, raising fears over a key global shipping chokepoint.

Syria taps Chevron, Qatar for offshore oil and gas exploration

Chevron signed a preliminary agreement with Syria’s state-owned oil company and Qatar’s UCC Holding to study prospects for finding offshore oil and gas as the country tries to rebuild its economy from 14 years of civil war.

At a signing ceremony in Damascus on Wednesday, Syrian Petroleum Co. CEO Youssef Kabalawi described the venture as “the most important” offshore energy exploration deal in Syria’s history.

For Syria, the agreement offers a possible route toward developing offshore resources for the first time as the fledgling government of President Ahmed al-Shaara seeks to revive energy production and attract foreign investment.

The deal builds on Chevron’s expanding eastern Mediterranean portfolio, which includes a recently approved expansion of Israel’s Leviathan gas field, which is set to supply Egypt and others with more than $35 billion worth of natural gas.

Separately, TotalEnergies is leading a consortium with Eni and QatarEnergy that received a new permit to explore offshore Lebanon. The French company began looking for natural gas off the Lebanese coast in late 2022, but results so far have been disappointing.

Libya reopens oil, gas fields to foreign investors after 17 years

Libya is opening its oil and gas fields to foreign investors for the first time in more than 17 years, launching a licensing round that includes 22 onshore and offshore blocks.

Major international energy companies, including BP, Chevron, ExxonMobil, TotalEnergies, Shell, and Eni, have qualified to compete for exploration and development licenses, with awards expected early next year, The National reports.

The government has revised its production sharing framework to offer more attractive terms to investors and anticipates several hundred million dollars in new upstream investment.

While the move supports Libya’s broader economic recovery, ongoing political divisions and security risks continue to weigh on investor confidence. 

The Daily Circuit: Saudi Arabia’s deepening deficit + Alpha Dhabi’s Aldar selloff

👋 Hello from the Middle East!

In the Daily Circuit today, we’re reporting on Saudi Arabia’s split with the IOC over staging the Olympic Esports Games, the new expansion plans for Abu Dhabi’s Zayed International Airport, Alpha Dhabi’s efforts to raise $400 million by selling part of its stake in Aldar, and Lunate’s new $1 billion investment platform. But first, third-quarter numbers show the depth of Saudi Arabia’s budget woes.

After a week of navel-gazing at the FII business conference in Riyadh about the impact of falling oil prices, Saudi leaders received third-quarter data that illustrates why they need to keep making hard decisions on budget cuts.

In the three months ending Sept. 30, the Saudi Finance Ministry said its deficit widened to 88.5 billion riyals ($23.6 billion), bringing the total shortfall for the year to nearly $50 billion. Oil revenue fell to about $40 billion from just under $51 billion a year earlier, while non-oil income held steady at $31.7 billion, according to the report issued Thursday.

Now it becomes clearer why one cabinet minister after another this week took to the stage at the King Abdulaziz International Conference Center to solicit foreign investment, conceding that the government will have to shrink or defer parts of its most ambitious megaprojects like NEOM. Some 9,000 FII attendees went home digesting prospects for a new era of austerity.

Ratifying that conclusion, the kingdom’s number crunchers now project a 2025 deficit of 5.3% of GDP as oil prices have slid in the past three years to below $70 a barrel from a high of $125.

The Saudi Capital Market Authority, meanwhile, has delayed a decision on whether and how to open Riyadh’s Tadawul stock market to non-resident foreign investors until next year, Bloomberg reports. The Capital Market Authority is analyzing public and stakeholder feedback on the move.

“We will be revisiting foreign ownership limits next year,” Mohammed El-Kuwaiz, CMA Chairman, said. “Whether or not we will eliminate foreign ownership limits or more gradually increase them on multiple stages, this will really become the output of our analysis.”

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