Saudi Arabia Faces Crossroads After UAE Exit from OPEC+: Price War or Stability?

Saudi Arabia is standing at a geopolitical and economic crossroads following the UAE’s exit from OPEC+, a move that has shaken global oil markets and raised questions about the future of price stability. Analysts at MBSB outlined three possible scenarios for Saudi Arabia’s response, each carrying significant implications for regional and global energy dynamics.

Scenario 1: The Price War The UAE’s departure could threaten Saudi Arabia’s position as Asia’s preferred supplier. If the UAE leverages its independence to secure exclusive deals with China or India, Saudi Arabia may be forced to slash prices to remain competitive. To discourage other Gulf states from leaving OPEC+, Riyadh might crash the market to demonstrate the risks of operating outside the cartel. Furthermore, once the US-Iran war ends and the Strait of Hormuz reopens, a flood of withheld oil could hit the market. If the UAE aggressively dumps supply, Saudi Arabia may pre-emptively flood the market to undercut them.

Saudi Arabia

Scenario 2: The Cold War (Base Case) In this scenario, neither side risks destabilizing the market. Saudi Arabia would halt coordination with the UAE, keeping production low to maintain stable prices, while the UAE ramps up output gradually. Riyadh could build alliances with other Gulf states to isolate the UAE, while Abu Dhabi strengthens ties with the US and Israel, potentially at China’s expense.

Scenario 3: Maintaining Stability Saudi Arabia’s fiscal needs make stability the most pragmatic option. With a USD74 billion deficit, Riyadh requires oil prices around USD85pb to balance its budget. Current elevated prices provide a war windfall, funding its defense industry amid regional conflicts. Russia is also likely to pressure Saudi Arabia to avoid a price war, as it would undermine its own financial interests.

Implications for Malaysia

Each scenario carries different outcomes for Malaysia’s oil and gas sector. A price war (Scenario 1) would benefit storage tankers and terminals as traders exploit contango opportunities, hoarding cheap oil. Stability (Scenario 3) favors upstream players, including exploration, drilling, FPSOs, and OGSE firms, while allowing PETRONAS to maintain its Activity Outlook.

MBSB notes that oil price spreads could widen dramatically, ranging between USD50–120pb depending on geopolitical timing. Companies relying on OPEC+ intervention as a safety net face higher risks, while Asian refineries must closely monitor Saudi Aramco’s official selling prices, as discounts may signal a looming crash.

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