UAE gets higher OPEC+ crude production quota

The UAE successfully lobbied for a higher OPEC+ production quota that would allow OPEC's fourth-largest producer to pump an additional 300,000 b/d crude oil, phased in over the first nine months of 2025.

At a meeting June 2, OPEC+ ministers agreed to extend a set of cuts totaling some 3.7 million b/d that had been phased in since October 2022 by a year, until the end of 2025.

The exception to this was the UAE that will be allowed to gradually utilize its extra capacity from January.

The country produced 2.95 million b/d oil in April, according to the Platts OPEC+ survey by S&P Global Commodity Insights. This was above its quota of 2.91 million b/d.

The Gulf state will have a baseline production target of 3.519 million b/d from 2025, not including any voluntary cuts it might make.

The UAE is one of several key OPEC+ members that are implementing voluntary production cuts. The group has agreed to begin scaling them down from October to earn back market share without sending prices downward.

Platts, part of Commodity Insights, assessed Dated Brent at $80.18/b ahead of the June 2 meeting, down from a 2024 peak of more than $93/b in early April.

"The UAE has dramatically boosted its production capacity in the last couple years, and the increased baseline production target is reflective of facts on the ground," said Mark Finley, a fellow in energy and global oil at the Baker Institute for Public Policy at Rice University.

The capital Abu Dhabi drives the country's energy policy and state-owned ADNOC has recently upped its production capacity to 4.85 million b/d, with plans to reach 5 million b/d by 2027. ADNOC alone has over 1.3 million b/d in spare production capacity with the 3.519 million b/d quota.Smaller oil companies in other emirates, including Sharjah National Oil Co. and Emirates National Oil Co., add more barrels.

Even with the additional barrels per day in production, the UAE -- which currently holds 40% of its capacity offline -- will still hold 30% of its capacity offline, Finley said.

"If you look at spare production capacity as a share of total production, the Emirates are in a completely different ballpark from everyone else in the organization," Finley said.

OPEC's biggest producer Saudi Arabia holds more barrels in spare capacity, but as a share of total production, even the kingdom's share at 25% of their total is smaller than the UAE's share.

The UAE has long sought to up its daily production as it seeks to further develop its energy sector and become self-sufficient for gas by 2030. Most of the gas produced in the UAE is associated gas, with production constrained by the oil production quota set by OPEC+.

ADNOC Gas, a subsidiary of ADNOC, plans to spend more than $13 billion over the next five years across multiple gas projects. ADNOC plans to spend $150 billion by 2027 to meet its 5 million b/d target.

Pumping more crude would be beneficial for the UAE's expansion plans and tensions have previously flared within the group. There were market talks that the UAE could quit OPEC to allow the country produce oil unfettered. It would be a move that a Baker Institute analysis found could result in $50 billion-70 billion/year in additional revenues by 2028.

"It is likely that the increase was a move to keep the UAE content within OPEC+ and to avoid any repeat of the divisions which marred previous summits in November 2020 and July 2021, when on both occasions dissent became public and was accompanied by trial balloons floated in media articles about the possibility that the UAE might one day leave OPEC," said Middle East fellow Kristian Ulrichsen, also at the Baker Institute.

The OPEC+ production increase comes as UAE's seaborne crude exports saw a significant decline in May, with average daily export volumes totaling 2.694 million b/d -- a 22% decrease compared to April's 3.433 million b/d, according to Commodity Insights. Upper Zakum crude exports also slowed 9% month on month. Murban exports hit a record-breaking 1.666 million b/d in April and only tailed off slightly in May to reach 1.369 million b/d.