Oil prices slide after UAE quits OPEC

Brent crude futures for June delivery fell by 1 cent to $111.25 per barrel, after rising over the previous seven sessions. The June contract expires on Thursday, while the more active July contract dropped by 28 cents to $104.12.

The slight decline on Wednesday may be partly linked to the UAE’s unexpected decision to leave OPEC, as it points to stronger supply prospects once the country is freed from the group’s production quotas.

However, this effect is not immediate, as additional barrels may not be available in the near term due to the ongoing blockade of the Strait of Hormuz.

Although prices have eased somewhat, this appears to be more of a correction after previous gains, as Brent crude still holds at around $110 per barrel.

“The recent rise in oil prices has been driven by the Strait blockade. If Trump is prepared to extend the blockade, supply disruptions would worsen further and continue to push oil prices higher,” said Yang An, an analyst at Haitong Futures.

According to experts, crude oil inventories fell by 1.79 million barrels over the week. Gasoline stocks dropped by 8.47 million barrels, while distillate inventories declined by 2.60 million barrels.

Background

Yesterday, April 28, the UAE announced its withdrawal from OPEC and OPEC+ at the worst possible time for the oil cartel — as the war with Iran is paralyzing supplies through the Strait of Hormuz.

The timing of the exit is extremely painful for OPEC. Gulf countries are already facing difficulties exporting through the Strait of Hormuz, a narrow maritime passage between Iran and Oman.

The UAE’s exit is a major victory for US President Donald Trump. He has long criticized OPEC, accusing the organization of artificially inflating oil prices at the expense of the rest of the world.