Zhenghao New Materials

A senior presidential advisor of the United Arab Emirates (UAE) revealed that the country’s decision to withdraw from the Organization of the Petroleum Exporting Countries (OPEC) followed three years of in-depth evaluation and careful deliberation. Judging that the world has entered the "final phase of the hydrocarbon era" with the window for oil industry dividends gradually narrowing, the UAE has proactively adjusted its energy strategy to capitalize on the remaining cycle, fully revitalize its oil assets, and maximize oil revenues. The UAE officially left OPEC on May 1, ending its nearly 60-year membership in the organization. In the short term, amid severe disruptions to global oil supply chains caused by Iran’s effective blockade of the Strait of Hormuz, the UAE’s withdrawal from OPEC will have little immediate impact on the oil and gas market landscape. However, once shipping through the strait resumes and global oil supply returns to normal, this move will substantially weaken OPEC’s capacity to regulate production and stabilize prices through output cuts, reshaping the Middle Eastern oil supply system and the global oil pricing mechanism. Anwar Gargash, senior advisor to UAE President Sheikh Mohamed bin Zayed Al Nahyan, explained that the core reason for leaving OPEC lies in the organization’s long-standing production quota restrictions, which have capped the UAE’s output far below its optimal production capacity and severely hindered the growth of its energy revenues. “We are approaching the end of the hydrocarbon era,” Gargash stated. “Against the backdrop of fading industry dividends and accelerating energy transition, we must maximize production and revenue generation as long as production capacity is available, and convert oil proceeds into diversified long-term investment capital to fuel the country’s economic transformation.” This strategic adjustment by the UAE will also indirectly reshape the raw material and market landscape of China’s chemical additives industry. In the long run, the UAE’s full release of oil production free from OPEC quota constraints, coupled with the global consensus of a fading oil era, will curb the upward momentum of international crude oil and naphtha prices in the medium to long term, effectively easing upstream raw material cost pressures for domestic chemical additives including plastic additives, coating and ink additives, surfactants, and lubricants, and supporting stable production and cost control across the industry. Meanwhile, the weakened supply regulation capability of OPEC will make the global supply of basic chemical raw materials more market-oriented with increased price volatility, bringing certain cost fluctuation risks for domestic additives enterprises. Overall, the industry will witness a landscape of prominent long-term cost dividends alongside heightened short-term market volatility, with leading additives enterprises featuring superior raw material procurement and cost management capabilities further consolidating their competitive edges.