Russia to stay in OPEC+ as UAE exit raises market concerns

(Bloomberg) – Russia said it has no plans of leaving its alliance with OPEC after the United Arab Emirates’ shock decision to quit the cartel raised questions about its future amid a historic supply disruption caused by the Iran war. 

Moscow isn’t considering the possibility of leaving the partnership with the Organization of the Exporting Petroleum Countries and hopes the UAE’s exit from the group doesn’t mean the end of the broader OPEC+ alliance, Kremlin Spokesman Dmitry Peskov told local media. Russia and Saudi Arabia are the de facto co-leaders of OPEC+.

The UAE’s exit from OPEC after six decades of membership is the culmination of years of tension with Saudi Arabia over oil output policy and competition for regional political influence. While the group’s top members in the Persian Gulf have been grappling with the closure of the Strait of Hormuz, Russia has struggled with Ukrainian attacks on its energy infrastructure. 

Russia has no incentives to leave the OPEC+ alliance as it sees no options to raise oil production significantly in the near future, a person close to the nation’s government said, asking not to be named as the considerations are not public.

The UAE announced its exit from OPEC, effective May 1, on Tuesday. It’s a significant blow to the group and its ability to manage oil prices by adjusting supply. Before the Iran war, the UAE was the third-biggest OPEC producer, trailing only Saudi Arabia and Iraq. 

“This is a very important area of work, especially crucial in the current conditions, when energy markets are, to put it mildly, in turmoil,” the Interfax news agency quoted Peskov as saying. The OPEC+ format helps significantly minimize fluctuations on energy markets and stabilize them, he added. 

The comments from the Kremlin echoed a statement from Kazakhstan on Wednesday. The energy ministry in Astana said changing the format of Kazakhstan’s participation in the OPEC+ alliance isn’t on the agenda. Earlier, several officials at other OPEC+ members said they didn’t expect a wider exodus to immediately follow the UAE. 

Russia’s ability to ramp up production remains limited amid intensified attacks on its oil infrastructure, from refineries to sea terminals, as Ukraine aims to reduce the inflow of petrodollars to nation’s coffers.

In March, Russia’s crude-only output was virtually flat after three consecutive months of declines at 9.167 MMbpd. The figure — which doesn’t include output of condensate — is 407,000 bpd lower than what Russia was allowed to produce in March under an agreement with OPEC and its allies.