OPEC had its first meeting in a long time, since it lost one of its most consequential members, and the result revealed a lot – not only of what was decided, but also of what was not said.
On Sunday, seven of the remaining members of the group agreed to increase the collective oil production quotas by 188,000 barrels per day in June, continuing on a supply path that effectively treats the withdrawal of the UAE as though it never occurred.
The bloc statement reiterated the group commitment to contribute to the stability of the oil market as the foundation of the increase. It did not mention the withdrawal of the UAE, although the country was the fourth-largest producer in the group before its withdrawal became effective on May 1.
Saudi Arabia and Russia had the biggest shares of the June increase at 62,000 bpd and 9.762 million bpd respectively. Iraq adds 26,000 bpd to a target of 4.352 million, Kuwait 16,000 bpd to 2.628 million, Kazakhstan 10,000 bpd to 1.599 million, Algeria 6,000 bpd to 989,000, and Oman 5,000 bpd to 826,000.
The June figure is a bit lower than the 206,000 bpd growth that OPEC announced last month. The difference is a subtraction of the UAE share of production, which officially left OPEC on May 1.
The group said the voluntary adjustments could be reimbursed in stages, in part or entirely according to the changing market conditions, and that it could increase, pause or reverse production levels as necessary.
Not just a supply move
The growth that was announced on Sunday is well known to be more of a message than of barrels. The total OPEC production dropped to 27.68 million bpd in March, compared to a monthly quota of 36.73 million bpd, a shortfall of about 9 million bpd that was caused by war-related disruption, rather than voluntary restraint, according to Priya Walia, analyst at Rystad Energy.
The March supply shock was greater than the 6.28 million bpd decline experienced during the Covid-19 pandemic in May 2020, and was more than the output losses of the 1970s oil crisis and the 1991 Gulf War.
Rystad Energy analyst Jorge Leon told AFP the group was sending a “two-layer message” with the move. The fact that the UAE has been silent about its departure was an indicator of strained relations, he said, adding: “By continuing to pursue the same line of production, minus the UAE, it is acting as though nothing has happened, deliberately understating internal divisions and projecting a facade of stability. While output is increasing on paper, the actual impact on physical supply is very small given the Strait of Hormuz constraints.
The Strait of Hormuz problem
The oil exports of the Middle East are still to a large extent, choked by the Iran conflict. The Strait of Hormuz, through which about a fifth of world oil trade once passed, has been effectively closed since the war began with the US-Israeli attacks that started on February 28. Iraq, Kuwait, Saudi Arabia and the UAE, all the members of the Gulf, are being hit by the closure, and their untapped reserves are the backbone of the spare capacity of OPEC.
The announcement on Sunday caused the US crude oil futures to fall by 3% to close at 101.94 per barrel after the announcement. Brent crude fell by almost 2 percent to close at $108.17. Both are about 78% higher since the beginning of 2026.
Iran, the target of a retaliatory US blockade on its exports, is an OPEC member but is not subject to quotas. The second-largest producer in the group, Russia, has been one of the biggest beneficiaries of surging energy prices, although it seems to be struggling to produce at the level of its current quotas as Ukrainian drones continue to hit oil industry facilities.
How big of a deal is the UAE exit?
According to Amena Bakr, an analyst at Kpler, the departure was a big deal to OPEC. Other instances of withdrawal by Qatar in 2019 and Angola in 2023 were not as significant in comparison.
The conflict at the core of the UAE exit was its baseline quota, which Abu Dhabi had repeatedly sought to increase to reflect its growing production capacity nearing 4.8 million barrels per day, which put it in direct conflict with Saudi Arabia over market strategy. State-owned ADNOC intends to expand its production to five million barrels a day by 2027 – many times higher than the last quota of about 3.5 million barrels. On Sunday, ADNOC also promised to invest $55 billion in new projects in the next two years, confirming that it is accelerating the growth outside the framework of OPEC membership.
And there is a larger danger the exit signs to the unity of OPEC. The move by the UAE may embolden Iraq and Kazakhstan, both of which have been accused of repeatedly exceeding their production quotas. When either of the two countries does the same or just ceases to observe quota discipline, the capacity of the cartel to control the world supply becomes much weaker.
What this implicates on oil prices
To global energy markets, the image has remained one of limited supply, high prices, and a cartel that is holding its line on paper but the reality of the Strait of Hormuz closing is limiting what those paper targets can actually deliver. Until there is any meaningful advancements towards reopening the strait, whether through a US-Iran deal or a break in hostilities, the supply increases OPEC announces will be largely theoretical.
US President Donald Trump said on Saturday he had been informed of the idea of a deal with Iran but was awaiting the exact wording, and warned that there was still the possibility of renewing strikes should Tehran misbehave. An Iranian offer, which Trump has so far rejected, would open the Strait of Hormuz to shipping, and lift the US blockade of Iran, but leave negotiation of the Iranian nuclear program to another occasion. Whether such discussions are fast enough to alleviate the oil markets is yet to be known.
Disclosure: This article is for informational purpose only.
