The departure of the United Arab Emirates from OPEC will not impact Guatemala or Central America

Jorge García Chiu, former vice minister of Energy and Mines and consultant on energy issues, analyzed the announcement of the departure of the United Arab Emirates (UAE) from the Organization of Petroleum Exporting Countries (OPEC) on May 1, and confirmed that there will be no effect for economies such as Guatemala and Central America.

The former official indicated that there may be a reduction in international prices for a barrel of oil and that currently there are several producing countries that market based on market guidelines.

He explained that the United Arab Emirates is a country that produces about four million barrels of oil per day, but that together with Saudi Arabia it has a good position as an Arab bloc.

The price of WTI oil (reference for Guatemala) closed yesterday at US$99.93 per barrel, with a rise of 3.7% associated with the ups and downs in the peace negotiations between the US and Iran and the departure of the United Arab Emirates (UAE) from OPEC and the OPEC+ alliance.

What does the announcement of the departure of the United Arab Emirates (UAE) from the Organization of Petroleum Exporting Countries (OPEC) mean for Guatemala and Central America?

In general, there will not be any major movement in the world market and it will remain the same.

In the end, each oil-producing country has to market its oil and OPEC tried to agree on some issues such as prices (quotation), but in recent years the international price has been regulated by demand, so I think it will not have a greater impact.

What could be expected with this announcement?

It will not affect either the production or the price of oil, because all the countries that are producers do so with respect to the orders they have and the United Arab Emirates will continue producing, and there is no doubt that this is its source of income, only that from now on it will no longer go to OPEC, which is a kind of cartel that agrees with international prices, which is a practice that should not be allowed on a commercial scale, but that is what they have done.

In that regard, It is convenient for countries like Guatemala and Central America to dissolve it and for each country to negotiate with them as they can and that can lower prices.

There will be more competition and the issue of the prices at which they are sold may be more free.

It is obvious that, if OPEC sets the prices and they are not there, they will market it at the price they want. In fact, this is already the case because Russia markets it at a price; The United States has its own market and some that are still united in OPEC, especially the Arabs.

On the oil map, what does the United Arab Emirates represent?

The main one continues to be Saudi Arabia, but also the Emirates.

The United Arab Emirates has a production of between three to four million barrels of oil per day, above 80 million barrels per day, which is the average world production.

They would be producing between 5% or 6% of world production and for them it represents 30% of GDP.

Furthermore, it is a country that has the seventh largest oil reserve in the world and the largest is Venezuela. In 2024 they produced a little more than four million barrels per day and have expansion plans for 2027 until they reach five million barrels of crude oil per day.

Without a doubt, He is an important actor and there is no doubt.

With this withdrawal, what do you see for the future of OPEC?

A few days ago, this producing country announced its departure and we have to wait to see if it materializes.

It must be seen from the historical position, which is an important country, because adding their production to that of Saudi Arabia, between them two have been the joint largest producers of oil.

OPEC is like creating a union here in Guatemala and everyone can set the same price, which is no coincidence, it is studied and prices are set the next day. This may have its advantages for them, but not for the consumer, because there is no real competition, which is what happens with OPEC.

A minimum price is set and it does not go down there, even if you do not buy from them, so there is not such real competition, but there are other countries that are producers such as Russia, Norway, the United States, which in the end ceased to have any importance after the problems that arose in 1970 when they stopped selling to the United States, which there was rationing in Guatemala.

So if the United Arab Emirates comes out, OPEC will continue and will still have less impactwhich is favorable for consumers.

What are OPEC and OPEC+?

OPEC is an intergovernmental economic organization founded in 1960 by Saudi Arabia, Venezuela, Iran, Iraq and Kuwait. Its creation responded to the decrease in the official price of crude oil set unilaterally by the large international oil companies, known as the ‘Seven Sisters’, who dominated the oil market.

OPEC emerged as a counterweight to that dominance and with the objective of coordinating and unifying the oil policies of its member countries, in addition to defending their income from crude oil exports.

Until now, OPEC was made up of 12 countries: the five founders, UAE, Algeria, Nigeria, Libya, Equatorial Guinea, Congo and Gabon.

OPEC has its headquarters in Vienna and holds ministerial conferences on a regular basis twice a year, for several years only electronically.

Since December 2016, the OPEC+ alliance has also existed, to which the group’s countries and ten other major oil producers, led by Russia, belong. The OPEC+ ministerial market monitoring committee (JMMC) meets electronically every two months.

What are the official reasons for the US withdrawal?

According to the Emirati Government, the decision is driven by “national interests” and by the country’s commitment to contribute to meeting the urgent needs of the market, in a context of geopolitical volatility derived from the disturbances in the Persian Gulf and the Strait of Hormuz, which affect supply.

The Emirati Minister of Energy and Infrastructure, Suhail bin Mohamed Al Mazrouei, stated that the withdrawal “reflects a political evolution aligned with long-term market fundamentals.”

In what geopolitical context does the exit occur?

The withdrawal occurs in the middle of the war between Israel, the United States and Iran, which began on February 28, which has led to the blockade of the Strait of Hormuz and attacks on energy facilities in the region.

According to OPEC itself, The group’s crude oil production fell in March by almost 8 million barrels per day (mbd), 27.5% less than in February, due to the conflict and blockade.

The report notes that the conflict caused drastic drops in supplies from Saudi Arabia, Kuwait, the UAE and Iraq. In the Emirati case, pumping was reduced by 1.5 mbd.

The UAE’s march takes place at a time of maximum tension between the Persian Gulf neighbors, whom the Emirates have accused of not coordinating positions in the face of Iranian attacks against the region’s energy infrastructure.

What will happen to the UAE’s oil policy?

The Emirati authorities have indicated that, after leaving OPEC, the country will continue to play a responsible role by increasing production gradually and prudently.

Likewise, the Emirati Minister of Energy reiterated the UAE’s commitment to energy security and guaranteeing reliable supply. Until the start of the war, the UAE produced about 3.4 mbd of oil, and the country has known reserves of up to 113 billion barrels, the sixth largest in the world.

What implications does it have for OPEC and OPEC+?

The Emirates announcement comes at a time of high volatility in energy markets.

With its departure from OPEC, the UAE will no longer have to comply with the production quotas imposed by the group, which could end up exporting more than until now. That could moderate prices in a market highly stressed by the war and the conflict around the Strait of Hormuz, through which 20% of all crude oil exported to the international market passes.

The UAE’s withdrawal is a challenge for its large neighbor Saudi Arabia, which together with Russia dominates OPEC+. The USA and Saudi Arabia have had numerous disputes in the past over the level of production of each OPEC member country.

With the departure of the UAE, Saudi Arabia is the only OPEC country with notable potential to increase production. The question will be whether Saudi Arabia manages to keep what remains of the organization together.

The last major country to leave the group was Qatar, which left in 2019 to focus more on natural gas production. Other countries that left the group in recent years were Angola (2023) and Ecuador (2020).

With information from EFE