Abu Dhabi (Caasimada Online) – While Russia keeps its oil channels open to finance its Ukrainian campaign, and Saudi Arabia institutes drastic cuts to elevate crude prices, the United Arab Emirates (UAE) scores major points in the oil arena.
This June, during the crucial meet where the Saudi-led Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, charted their energy policy, the UAE achieved its long-standing ambition. They successfully managed to amplify the amount of crude they could produce.
This modification in the UAE’s oil production limit denotes a surge of 200,000 barrels per day in 2024, totaling 3.2 million barrels. This change couldn’t have come more opportune as oil prices soar, with Brent crude surpassing the iconic $80 per barrel mark.
Ellen Wald of Transversal Consulting stated, “The UAE’s production quota hike was a significant achievement for the Emirates, often overlooked amidst the broader geopolitical landscape.”
Saudi Arabia’s unyielding cuts versus UAE’s gains
While Saudi Arabia is tightening its belt further, prolonging its mammoth production cut of one million barrels of oil daily into September, the UAE is navigating the scenario with dexterity.
Viktor Katona from Kpler noted, “The UAE has marginally trimmed their output, resulting in oil prices that are about 15% higher than last month. Essentially, the UAE emerges as the predominant winner this season.”
Previously, Middle East Eye highlighted how Saudi Arabia, in its bid to bolster prices, had to grapple with Russia inundating the market.
This Russian strategy threatened Saudi Arabia’s top position as the foremost OPEC+ producer. Yet, Saudi Arabia’s current struggle isn’t limited to Russia; the UAE poses an emergent challenge, transcending from an ally to a potential rival in the oil circuit.
Deepening rift between UAE and Saudi Arabia
Historically, both nations have stood united, especially during the turbulent times of the Arab Spring, collaborating against protest movements they deemed perilous.
Together, they initiated a blockade against Qatar, supported General Khalifa Haftar in Libya, and even dispatched troops to Yemen against Iran-backed rebels.
However, this unified front is now showing cracks. A startling revelation by the Wall Street Journal highlighted a potential threat by the Saudi crown prince to barricade the UAE.
Furthermore, the UAE’s continued support for a separatist faction in Yemen, which frequently clashes with Saudi-backed forces, fuels the fire.
Greg Priddy, a US-based consultant, elaborated on these emerging divisions. “The dissonance between the UAE and Saudi Arabia isn’t limited to the Yemen conflict. Energy policies are another point of contention,” he shared.
Competing visions in energy policies
In 2021, disagreements between Riyadh and Abu Dhabi on oil policies became public when the UAE protested its low baseline for determining permitted oil production.
The UAE’s vision for its oil sector diverges from that of Saudi Arabia. While the former aims to capitalize on the current high demand, the latter seeks to maintain a tight supply to finance mega-projects, such as Neom and Red Sea developments.
Post Ukraine’s invasion by Russia, Emirati ambassador to the US, Yousef al-Otaiba, vocalized the UAE’s intention to augment oil production.
“Saudi Arabia is increasingly concerned about short-term prices impacting government spending, while the UAE, being wealthier per capita, doesn’t share this immediate concern,” remarked Priddy.
The internal dynamics of OPEC+ management have seen the UAE and Saudi Arabia drift apart.
The combative style of Abdulaziz Bin Salman, Saudi Arabia’s energy minister, contrasts sharply with his Emirati counterpart, Suhail al-Mazrouei. “Mazrouei’s efficiency and influence within OPEC have significantly boosted the UAE’s stance,” Wald observed.
Trade alliances and economic divergence
The UAE’s astute diplomatic ties, especially its growing rapport with Russian oil traders evading Western sanctions, have been a bone of contention.
The Emirati port of Fujairah has turned into a pivotal hub for Russian oil. Simultaneously, Saudi Arabia’s drive to revamp its image as a competitive business hub is progressing slowly.
Wald emphasized, “Saudi Arabia has to come to terms with the reality. Most traders, including Russians, prefer the UAE over Saudi Arabia for business.”
However, Saudi Arabia has its victories, notably through its national oil company, Aramco, which is expanding its footprint globally.
While Adnoc, the UAE’s state-owned oil company, is catching up, analysts believe that Saudi Arabia will retain its dominant position in the energy market due to its ambitious plans for the future.
Wald concluded, “Saudi Arabia’s potential to suddenly saturate the oil market is unparalleled, an advantage neither the UAE nor even the US can boast of.”