We’ll be hearing a lot about OPEC today after the United Arab Emirates (UAE) announced its departure from the group of major oil exporters.
OPEC was established in 1960 with the purpose of “coordinating and unifying the petroleum policies of its member countries and ensuring the stability of the petroleum market in order to ensure an efficient, economical and regular supply of petroleum to consumers.”
Initially, there were only five member states: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Since then, it has grown to 12, collectively supplying about 36.17% of the world’s crude oil production. OPEC member countries control approximately 79.22% of the world’s total proven crude oil reserves. The UAE joined in 1967.
OPEC+ is a larger group consisting of OPEC members and other oil-producing allies, including Russia.
So what will OPEC do? OPEC member countries monitor the market and jointly decide to increase or decrease crude oil production to maintain stable prices and supplies. A unanimous vote is required to increase or decrease oil production.
Why does the UAE want to leave OPEC? The UAE wants to expand OPEC’s production quotas because it has the capacity to produce far more oil than the country is currently allowed to produce. The UAE has announced that it will be able to leave the cartel and set its own production standards from May 1.
The oil and energy ministers of OPEC member states typically meet twice a year to decide on OPEC’s production levels. Extraordinary meetings will also be held as necessary.
The news did not cause a major change in oil prices, which have soared since the start of the Iran war. Many analysts expect the UAE’s decision to leave OPEC to increase global supply, leading to lower prices.
US President Donald Trump has previously accused OPEC of keeping oil prices “artificially high” by curbing the amount of oil released into the market.
