00:00I actually want to start with the OPEC news and I want to get your take on it and whether
00:07you think
00:07the UAE's decision to leave OPEC was an economically motivated one or whether it was politically
00:14motivated. Good morning, Jamal. It's always nice to be with you. I think it was both. It had
00:20dimensions of both economically, because there's always this tension in OPEC since the COVID
00:27pandemic between Saudi interests, which was really to maximize profit and the UAE's interest,
00:38which was to maximize output. And they didn't want it to be subordinate to Saudi interests
00:46within OPEC anymore. As your previous analyst said, they had the financial wherewithal to
00:52make these investments and to increase production. And the OPEC quotas simply didn't serve the
00:58UAE's interest moving forward. There was a political dimension to this, too.
01:03After the war with Iran and the tremendous hits the UAE took, more missile and drone hits than
01:11any other country in the region, it sees its future in a closer military and security alliance
01:18with the United States. And they've said that leadership, the UAE has signaled that and that
01:25the United States President Trump dislikes OPEC. It dislikes the cartel. It wants to. He has said
01:31many times over his time, his decades in interest in politics that the U.S. was protecting OPEC and
01:40there was a tension between U.S. interests and OPEC interests.
01:43So the fact that the UAE is breaking away from OPEC also signals to Washington a closer alignment
01:51to its interests.
01:54Okay. Interesting there. So you think the decision will actually bring the UAE closer to the U.S.
01:59What about the rest of the group? What happens to OPEC from here onwards?
02:04Well, it's losing its third biggest producer. That's structurally very significant.
02:11I think the group moves forward, but it moves forward weaker under Saudi leadership.
02:19And right now that leadership is going to be tested, obviously, because of what's happening
02:23in the Straits of Hormuz. There's not even a trickle coming out of the Persian Gulf.
02:28But, you know, at some point, Iran is going to, once this conflict resolves, Iran is going to be,
02:34if there's a diplomatic settlement, come back into the fold. Their production is going to come back
02:39into the fold. But that's not going to be enough to make up the difference from the loss of the
02:45UAE.
02:47And there is going to be tension between the UAE and its neighbors in the region and the OPEC cartel
02:54as a whole.
02:56Yeah. Do you see any other countries following suit and leaving as well? I mean, the UAE is certainly
03:01not the first to leave. Qatar left in 2019, Angola as well. Could this set the precedent for others?
03:09Those were more idiosyncratic and smaller. The volumes of Qatar and Angola didn't match the UAE's volume.
03:19UAE is a heavyweight, was a heavyweight within OPEC. It could. But the UAE is unique amongst these
03:28countries because it's a surplus country. And it had this desire to really flood the market
03:37with production and not be inhibited by OPEC's quotas. And it didn't want its interest to be
03:47subordinated to Saudi's interests. The other countries within OPEC right now don't have this
03:54spare capacity that the UAE has. Most of them are not the surplus countries that the UAE is. So
04:01it doesn't have those reserves to bring to the fold.
04:06Yeah, which is, I guess, one of the key catalysts over here for the decision in itself.
04:10Look, you know, assuming at some point the strait does reopen, which is a big assumption at this
04:16point, what do you think that medium-term impact is going to be on oil prices? And given the fact
04:22that UAE will now be able to produce as much as they want, because they're not going to be
04:27restrained by collective decision-making, are we going to see a war, so to speak, of market share?
04:35I think you will see a war of market share, but I don't think you're going to see it in
04:38the short
04:39to medium term, because in the short to medium term, they've got to get those vessels out of the
04:43Persian Gulf. And, you know, your guess is as good as mine when this ends. It will end at some
04:50point.
04:50But whether that's going to be in a couple of weeks or a couple of months, or it's going to
04:54take, you know, another war to resolve, we just don't know. So in the meantime, the UAE and Saudi
05:03are using the pipelines, the Fujairah pipeline, to get some oil out. The Saudis are using the
05:09Yambo pipeline to get some oil out. Prices are higher, and they're going to remain higher until
05:16this situation resolves. Once it does resolve, once those ships are cleared out of the Persian Gulf
05:22and the market stabilizes, then that's when the UAE is going to really bring that excess capacity to
05:28bear. And long term, I think it is bearish. It's going to be bearish for oil prices.
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