Bankinter | The United Arab Emirates (UAE) announced yesterday its decision to leave OPEC on 1 May, a move it says will help it meet changing demand. The news is significant because: (i) it produces around 3 million bpd (3% of global output). Against a backdrop of structurally high oil prices, the UAE would prefer not to be subject to constraints and specific quotas. (ii) It reflects internal tensions within OPEC. Particularly those between Saudi Arabia (9% of production) and the UAE. (iii) It opens the door for other members to leave the organisation, particularly in a quota-driven environment. In practice, the news implies less controlled oil prices in the future. Our base case scenario assumes that the war has practically ended, but will leave a scenario of lower supply, affected by attacks on Gulf infrastructure. We therefore expect high oil prices, albeit somewhat lower than current levels ($104/barrel). We estimate that Brent crude will close the year at $85 and 2027 at $80. We reiterate our recommendation to tactically buy companies in the oil sector. Oil infrastructure: Halliburton, SLB, Baker Hughes and Técnicas Reunidas. Oil companies: Chevron, Repsol and Eni.
United Arab Emirates to leave OPEC on 1 May, leaving door open for other members to follow suit
