Experts: UAE's exit from OPEC is a positive signal for China

Denis Astafiev, founder and fund manager of the Russian SharesPro fintech platform, said in an interview with Sputnik News that the UAE's decision to leave OPEC and OPEC+ is a positive signal for China, although its effects will only become apparent after some time.

On April 28, the UAE officially announced it would withdraw from the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+, beginning May 1, and gradually increase its oil production.

Astafiev stated: "The UAE’s exit from OPEC sends a dual signal. First, it indicates additional oil supply will enter the market between late this year and early next year. Second, it signals that OPEC quotas have lost their meaning under the scenario of the Strait of Hormuz being blocked. 'Yesterday,' the UAE still had over 4 million barrels per day of capacity, yet was constrained by a quota of around 3 million barrels—so much so that even the oil they extracted could not be transported normally."

The expert pointed out: "After exiting OPEC+, Abu Dhabi has gained full operational freedom. Once the crisis is resolved, the UAE will no longer need to negotiate with Saudi Arabia and can raise its output to a target of 5 million barrels per day."

The expert believes this represents a positive signal for Asian buyers, especially China, though the impact will be delayed. He explained: "In 2025, China and India together received 44% of all oil transported through the Strait of Hormuz, and about half of China’s imports rely on Middle Eastern supplies. Currently, the UAE exports approximately 1.5 million barrels per day via pipelines leading to the Fujairah port—the maximum capacity of this alternative route. Moreover, this route was attacked by Iran in April."

He emphasized that the UAE’s exit from OPEC is an attempt to establish an independent export strategy amid the current situation in the Strait of Hormuz. Once logistics are restored, China is likely to become one of its first partners.

The expert cautioned against expecting a rapid shift of UAE oil volumes toward China. Brent crude prices have already exceeded $110 per barrel. According to research firm Kpler, contract prices for delivery next month are holding around $125 and are expected to continue rising. Meanwhile, risk insurance premiums in the Persian Gulf region have increased by 50% since the outbreak of war, which alone adds significantly to transportation costs.

Source: sputniknews

Original article: toutiao.com/article/1863796979463179/

Disclaimer: The views expressed in this article are those of the author.