One of the key players in the global oil market - the United Arab Emirates - has announced its intention to suspend membership in OPEC and OPEC+. Such a move could weaken the mechanism for regulating the oil market through supply restrictions and create risks for Russia's oil export revenues. This was reported by the Foreign Intelligence Service of Ukraine, according to UNN.
Details
According to the SZRU (Foreign Intelligence Service of Ukraine), the UAE currently produces about 3 million barrels of oil per day, while the country's actual capacity is about 5 million barrels. In the event of a withdrawal from the agreements and an increase in production, the market could receive additional supply, which will affect global prices.
Intelligence officials note that under such a scenario, other market participants may also begin to increase production in an attempt to maintain or expand their market share. This could lead to a decrease in oil prices.
For Russia, such a development is particularly problematic due to higher production costs and more complex logistics. According to the SZRU's assessment, the cost of a barrel of oil in the UAE and Saudi Arabia is $5–15. At the same time, Russian production is linked to depleted fields, difficult climatic conditions, and expensive Arctic projects.
The Foreign Intelligence Service emphasizes that if prices fall to $30–40 per barrel, Russian Urals oil, taking into account traditional discounts and expensive logistics, could become unprofitable.
Russia will not be able to quickly increase production
According to intelligence assessments, Moscow does not have the capacity to respond quickly to a potential increase in production by the UAE. If necessary, the Emirates can promptly add about 2 million barrels per day to the market. Russia does not have such flexibility due to the specifics of its production, particularly in fields located in difficult climatic conditions.
Intelligence officials note that wells in permafrost cannot be quickly stopped and started without the risk of losing part of the fields. This limits Russia's ability to act on a strategy of increasing volumes to compensate for falling prices.
A blow to the Russian budget
The SZRU believes that the loss of windfall profits from oil against the backdrop of sanctions against the Russian energy sector could halt investment in the exploration of new fields and the modernization of the industry. For Russia, this creates long-term risks, as oil and gas revenues remain one of the key sources of budget funding.
The agency also predicts that Saudi Arabia and the UAE may increase competition with Russia in Asian markets, particularly in China and India. Their advantage could be cheaper, higher-quality oil without sanction risks for buyers.
For Russia, where oil revenues are of critical importance for the budget, the military, and social spending, such a scenario could become a serious economic blow.
Recall
In April 2024, Russia increased its oil revenues to the highest level since the start of the war in Ukraine.