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Saudi Arabia's long-term play for OPEC management

2026-05-03 16:36:17Kosova&Bota SHKRUAR NGA REDAKSIA VOX

Saudi Arabia's long-term play for OPEC management

The silence from Riyadh speaks for itself. Days after the United Arab Emirates shocked its neighbors by announcing its immediate departure from OPEC, neither the oil cartel nor its de facto leader, Saudi Arabia, have made any public comment.

The vacuum reflects both the shock of the decision and the position Saudi Arabia, the world's largest oil exporter, finds itself in. While its clash with the Emirates has been simmering for several years, the timing of the announcement - in the midst of a regional war - caught many by surprise.

Several people familiar with the situation said Riyadh received little warning and no opportunity for negotiation before a formal letter was delivered to Prince Abdulaziz bin Salman, the Saudi oil minister.

"They knew this was coming, but some are unhappy that they were not notified in advance," said a source close to kingdom officials.

Helima Croft, oil analyst at RBC Capital, said it was "an interesting moment to do this in the middle of a war."

Ali Shihabi, a Saudi commentator close to the royal court, said the Emirati move seemed "more politically motivated than economically compelling."

“It may aim to avoid Saudi-dominated decision-making, but the Emirates face the same basic dilemma as Saudi Arabia: increasing production could lower prices,” he said. “And by distancing itself from the natural bloc of Gulf producers, the Emirates risks gaining autonomy at the expense of influence.”

For now, Saudi Arabia's priority is to contain the fallout. Officials are aware that any public display of anger could roil already volatile oil markets or affect the 21 other OPEC members and the broader OPEC+ alliance as they consider their positions.

Instead, Riyadh is projecting calm and reassuring allies that its ability to manage the market has not weakened, ahead of a meeting of the seven OPEC members on Sunday to discuss increasing production. “They need to show stability now,” the source close to Saudi officials said. “We will be watching carefully for signs of cohesion emerging from Sunday’s meeting,” Croft added.

Mohamed Ramady, author of “OPEC in a Shale Oil World: What Next?”, predicted that Prince Abdulaziz would avoid severing ties with the Emirates. “His response will be that all doors will remain open for the Emirates to join OPEC,” he said. He added that he expects Saudi Arabia to slightly reduce its quota to bring it closer to Russia’s.

Behind the scenes, OPEC's secretary-general, Kuwaiti diplomat Haitham Al Ghais, has attempted to reassure markets that other countries are not seeking to leave and that the group remains stable despite the Emirates' departure.

The Emirates' move may have been unexpected, but it was also well-calculated. For years, the country has made it clear that it wanted to produce more oil than its OPEC quota allowed.

But by acting at a time when oil flows in the Persian Gulf are disrupted by war, Abu Dhabi has minimized the immediate impact on the market and reduced the likelihood of retaliation.

“They were very afraid that the Saudis would increase production to drive down prices and punish them,” the source said. “By doing it now, they eliminate that risk.”

Jim Krane, a Middle East energy expert at Rice University's Baker Institute, said Saudi Arabia has few good options for response as oil shipments through the Strait of Hormuz remain limited.

He stressed that the traditional way Saudi Arabia has imposed discipline in OPEC has been to threaten a price war, as its ability to increase production exceeds that of any other member. “That is not currently on the table,” he said.

However, Krane and others expect consequences over time.

One potential pressure point is the vast land border between the two countries, a vital artery for trade. “It’s a very busy crossing and the Emirates are very dependent on Saudi Arabia for food, especially dairy products, especially now that the strait is closed,” he said, warning that any disruption would be a “serious escalation.”

Krane, who estimated in 2023 that the Emirates could earn an additional $50 billion a year from non-OPEC oil, said the country does not pose an immediate threat to the cartel. Increasing production takes time and Abu Dhabi may choose to maintain spare capacity for strategic reasons.

In the short term, Saudi Arabia could face more tension within OPEC itself. The UAE's departure could encourage other members to seek looser production limits, especially after the conflict with Iran, when Gulf countries will want to regain market share.

“They will use this as leverage,” said one long-time OPEC observer. “They will say: we love you, but can we revise our quota? Saudi Arabia expects everyone to be less disciplined for a while.”

Frederic Lasserre, head of research at oil trading company Gunvor, said the real challenge will be to rein in countries like Iraq and Kazakhstan, which have been accused of sometimes producing above quota.

A former Saudi official said it was impossible to judge the impact of the Emirati decision at the moment. “We are in turmoil because of the war. There is a lot of uncertainty. In a normal situation we would know if this is negative, but until the Strait of Hormuz reopens, we are walking in the dark,” he said.

However, he stressed that Riyadh is confident that OPEC will survive. “It will not change now because one country withdrew. OPEC will continue.” (Financial Times)


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