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UAE Exit From OPEC, OPEC+ Removes Key Pillar of Market Control, Rystad Energy Says

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The United Arab Emirates's departure from the Organization of the Petroleum Exporting Countries and OPEC+ removes a key pillar supporting the group's ability to manage global oil markets, Rystad Energy said in a note Tuesday.

"Losing a member with 4.8 million barrels per day of capacity, and the ambition to produce more, takes a real tool out of the group's hands," analyst Jorge Leon said.

The timing also signals where the oil market is heading. With demand nearing a peak, the calculation for producers with low-cost barrels is quickly changing, and waiting under a quota system can start to look like leaving money on the table, he added.

As a result, Saudi Arabia is left doing more of the heavy lifting to maintain price stability, while the market loses one of its remaining shock absorbers, Leon said.

In the short term, the impact may be limited due to ongoing disruption in the Strait of Hormuz and overall geopolitical tensions but the longer term effects would be more consequential. "A structurally weaker OPEC, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilize prices," the analyst said.

The UAE is set to leave OPEC and OPEC+ on May 1, the Emirates News Agency said earlier Tuesday.

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