According to reports, the United Arab Emirates (UAE) is considering leaving the Organization of the Petroleum Exporting Countries (OPEC), a move that could result in an increase in production and excess supply of oil.
As a result of this news, Brent crude prices fell by as much as 2.8% to below $83 per barrel. OPEC was founded in 1960 and consists of 13 oil-rich countries that coordinate their production levels.
Although the UAE has stated that it will remain committed to the current OPEC deal for at least this year, tensions are rising between the UAE and Saudi Arabia.
The relationship between Crown Prince Mohammed bin Salman of Saudi Arabia and President Sheikh Mohammed bin Zayed al Nahyan of the UAE is reportedly deteriorating, as the two leaders have different visions of leadership.
Following the sharp drop in oil prices caused by the reported disagreement between Saudi Arabia and the UAE, the US markets have opened with gains.
The decline in oil prices has impacted the market, leading to a 0.2 per cent decrease in the FTSE 100 index, which is largely composed of energy companies, following a positive start earlier in the day.
BP shares have declined by 2.9 per cent and Shell has also experienced a 2.2 per cent drop, resulting in a decrease in the UK’s prominent stock market index.
Recently, the Wall Street Journal published an article quoting officials from the United Arab Emirates stating that the country is debating leaving Opec, causing oil prices to remain down by approximately 2 per cent. If the UAE withdraws from the Saudi-led cartel, it could weaken the group’s influence in global oil markets.
The UAE is currently required to produce less oil than its capacity within the 13-country group, leading to a negative impact on its revenue.
The Dow Jones Industrial Average increased by 0.2% to reach 33,076.95, while the S&P 500 rose by 0.4% to 3,996.87 after the opening bell.
The Nasdaq Composite, which has a heavier concentration of technology stocks, also climbed by 0.5% to 11,519.89.
