UAE’s shocking OPEC exit: Oil prices decline, Asian stocks surge

First, it was the ongoing Iran conflict that put global energy markets on edge and now it is the UAE’s shocking announcement to leave OPEC which is further pushing the markets to tumult.

On Wednesday, the stock markets across Asia rose despite losses on Wall Street, but oil prices tumbled in a recent development.

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Talking about the US futures, they edged higher. In South Korea, Kospi gained 0.3 percent to 6.657.40. Hong Kong’s Hang Seng rose 1.4 percent to 26,029.02.

Mixed results across Asian markets saw the Shanghai Composite climb 0.3 percent to reach 4,091.01, while India’s Sensex also found positive territory with a 0.4 percent gain.

On the other hand, the S&P/ASX 200 in Australia dipped 0.3 percent to 8,689.50, and Taiwan’s Taiex faced a steeper decline, losing 0.6 percent.

Conversely, oil prices, which have been surging since the start of the Iran conflict with the US, have declined. For instance, the Brent Crude prices tumbled 0.5 percent to $110.71 early Wednesday. Benchmark US crude fell 0.6 percent to $99.32 a barrel.

The significant shift in stock markets and energy sector comes after the UAE announced on Tuesday that it will exit OPEC, effective from May 1. The announcement worries the oil players and markets as UAE is OPEC's third largest oil producer. Around 40 percent of global oil output comes from OPEC.

At the heart of UAE-OPEC tensions lies Abu Dhabi’s resistance to OPEC production quotas in recent years, wanting to sell more oil to the rest of the world.

According to Capital Economics, “Having invested heavily in expanding energy production capacity in recent years, the bigger picture is that the UAE has been itching to pump more oil. The ties binding OPEC members together have loosened.”

Earlier in 2019, Qatar withdrew from the cartel. ING said UAE's departure “will reduce OPEC’s effectiveness in managing and influencing the global oil market through supply measures.”