Cheaper gas ahead as Trump hails historic UAE withdrawal from OPEC
Donald Trump, President of the US (photo: Getty Images)
The UAE's withdrawal from OPEC will help lower energy prices, which have skyrocketed due to the full-scale war in Iran. The US President supports this move and sees it as a positive, reports Bloomberg.
"I think it's great," Trump said Wednesday at the White House when asked about the move. "It’s a good thing for getting the price of gas down, getting oil down, getting everything down."
The UAE's official withdrawal from the organization is scheduled for next month. The group's influence on markets is now under threat.
However, the market is reacting differently so far — prices continue to rise. Bloomberg's analysts see no confirmation of the US president's words. The price of Brent crude jumped to a record high on Wednesday.
The main reason for the price increase is logistics tied to geopolitics. Official sources currently report a difficult situation.
Here are several key factors currently shaping the market:
- The oil market is completely dependent on the closure of the Strait of Hormuz.
- OPEC's dynamics will remain secondary for prices as long as this waterway is blocked.
- Only after it opens will oil flows return to normal.
Rift between the UAE and Saudi Arabia
The Emirates' walkout was not sudden, as the conflict had been brewing for a long time. It is the result of years of tension between the UAE and Saudi Arabia, OPEC's leader.
The countries have been arguing over several key issues:
- Oil production levels and strict quotas.
- The UAE's desire to play its own economic game.
- Competition for influence in the region.
The White House chief separately commented on the motives of the Emirates' leader. "He probably maybe wants to go his own way," Trump added, referring to UAE President Sheik Mohamed bin Zayed Al Nahyan.
Trump's "long blockade"
The US leader emphasized Washington's tough stance and called on the fleet to prepare for a long blockade of the strait. The Americans will detain all ships going to or leaving Iran until Tehran agrees to a new deal on its nuclear program.
Iran, for its part, has promised to continue blocking the strait from its side.
What is happening in the global oil market
The new sanctions package against Russia that the EU is preparing is intended to block the Russian shadow fleet, which allows Moscow to earn oil revenues.
Meanwhile, India has found a new oil supplier due to problems in the Strait. And it is not Russia, but Venezuela.
Due to the Strait's closure, the world is in an oil crisis, but this is not the only natural lever. We have also reported on five other places whose blocking or problems could collapse the global economy.
