Russian Deputy Prime Minister comments on UAE's withdrawal from OPEC: Conflict limits supply, will not immediately trigger a price war.

After the United Arab Emirates announced its withdrawal from OPEC, Russian Deputy Prime Minister Alexander Novak responded to the latest development in a public appearance on Thursday, emphasizing that this "exit" decision will not trigger a price war in the current context of global oil supply shortages. At the same time, Brent crude oil prices broke through $124 per barrel during Asian trading hours, setting a new record since the US military action against Iran, and serving as a clear indicator in the market to refute expectations of a price war. Novak stated, "Under a shortage of supply, how could there possibly be a price war?" Novak's remarks on Thursday directly address the core confusion in the market. He asked, "How could there be a price war when there is a shortage of supply in the current market situation?" His argument is based on an undeniable reality: the Strait of Hormuz, a key chokepoint for global oil transport, is almost completely blocked due to the US-Iran military conflict. Novak bluntly stated, "A large amount of oil cannot enter the market today, while demand far exceeds supply." Data shows that before the conflict, 125 to 140 ships passed through the Strait of Hormuz daily, but in recent days only 7 ships have transited, with no trace of crude oil tankers among them. At least 6 Iranian oil tankers were intercepted by the US military and forced to return. This key maritime passage, carrying about one fifth of global oil trade, one fifth of liquefied natural gas trade, and nearly one third of international fertilizer trade, is effectively "completely blocked." Against this backdrop, Novak also conveyed two important messages. Firstly, Russia and Saudi Arabia have not discussed the UAE's exit, and Moscow has no intention of following in the UAE's footsteps to leave the "OPEC+" alliance. Novak stated that this alliance is "very good at reducing risks in the oil market during crisis periods," enabling the maintenance of investment activities, industry development prospects, and regular interaction between countries. Secondly, despite the rift caused by the UAE's departure, as long as the cooperation between Russia and Saudi Arabia remains strong, "OPEC+" will continue to be the core mechanism affecting global oil prices. Why has the logic of a price war failed to materialize? In order to understand why Novak dismisses the expectations of a price war, we need to return to a fundamental physical fact: the willingness to increase production needs to match the ability to increase production. The UAE has long been dissatisfied with OPEC's production quota mechanism. By early 2026, the UAE's oil production capacity had reached 4.85 million barrels per day, and the Abu Dhabi National Oil Company plans to invest $15 billion to increase production capacity to 5 million barrels per day by 2027. However, OPEC's quota mechanism has long limited its production to 3 to 3.5 million barrels per day. With the "exit," the UAE theoretically has a potential production increase space of over 1 million barrels per day. The issue is, where does the increased oil go? The blockade of the Strait of Hormuz renders all production increase plans futile. Currently, the global daily oil supply gap is as high as 16 million barrels, surpassing the sum of the oil crises in the 1970s. According to analysts from JPMorgan and Credit Suisse, as long as the Strait of Hormuz remains closed, the UAE cannot expand exports, rendering production increases irrelevant. Both JPMorgan and Credit Suisse agree that the impact of the UAE's exit on short-term oil prices is almost negligible. Market data supports this assessment. Oil prices have not fallen due to the "exit" news, but instead continue to rise due to ongoing geopolitical catalysts. There are concerns in the market about the possibility of the US launching a new round of military strikes against Iran, prompting a swift missile response from Tehran, which could lead to intense geopolitical turmoil in the Middle East. Iran may also pose a threat to the Middle East region through its extensive network of undersea cables. During the Asian trading session on April 30, Brent crude oil futures broke through $124 per barrel, while WTI crude oil also rose to $109 per barrel. The previous day, Brent crude oil closed at $118.03 per barrel, with a single-day increase of 6.08%. Where is the real shadow of a price war? However, Novak's optimistic assessment does not, and cannot, eliminate the deep-seated concerns in the market about the medium to long-term outlook. S&P Global Platts Energy Information provides a unsettling forecast: if the UAE increases its daily production by 500,000 barrels within 6 months, the risk of global crude oil oversupply will increase significantly, and Brent crude oil may plummet from the current high level to below $60. Tamas Varga, an analyst at oil broker PVM Oil Associates, warns, "If the conflict continues, we cannot rule out the possibility of oil prices exceeding $150," because "alternative energy sources cannot supply enough in a short time to make up for the shortage." These seemingly contradictory expectations - one warning of a sharp drop and the other of a sharp rise - point to the same core contradiction: the timing of passage through the Strait of Hormuz is the sole key variable determining the direction of oil prices. Analysts suggest that the 2020 price war was fought between Saudi Arabia and Russia, and the next one may be between Saudi Arabia and the UAE. But the premise is that the Strait of Hormuz must first be reopened. In this scenario, the market is displaying a rare duality with both narratives coexisting: "short-term rapid rise" driven by geopolitical blockades, while "medium-term risk of a sharp drop" comes from the release of global spare capacity after the UAE's exit - currently, there is over 4 million barrels of idle oil production capacity globally, with Saudi Arabia and the UAE holding the majority. After the UAE's exit, the spare production capacity is almost entirely concentrated in Saudi Arabia, significantly narrowing the market's cushion zone.