A few days ago, the UAE did something few expected. It walked out of OPEC, the Organisation of the Petroleum Exporting Countries. After nearly six decades as a pivotal member, the country announced its departure from both OPEC and the broader OPEC framework. The official language was careful and measured, heavy on terms like strategic realignment and national interest. Strip that away, and what remains is a producer that ran out of patience with quotas that no longer served it.

At its core, OPEC is a cartel. Members agree to limit how much oil they produce, which keeps supply tight and prices higher than a free market would set them. Producers benefit from the elevated prices, but only as long as they play by the rules. The rules require accepting a cap on output, often well below what a member is capable of producing. That trade-off has limits, and for the UAE, those limits ran out.

The UAE has spent years and significant capital expanding its oil infrastructure. By 2027, it expects to reach a production capacity of nearly 5 million barrels per day. Its OPEC quota sits well below that number. The gap between what the UAE can produce and what it has permission to produce goes beyond a minor rounding error. It represents a structural mismatch that grows more expensive with every barrel left unproduced.

Classic........

© The Friday Times