Oil Market in UAE Analysis Essay

Since the year 1974, the United Arab Emirates in history has been identified as one of the global greatest distributors and producers of crude oil. From world 's profit distribution in the oil sector, they are identified to be the second that's after Saudi Arabia with the profit generated from oil forming up to 25 percent of the total annual income that the country is producing. Generally, before the discovery of oil back then, it is important to note that the United Arab Emirate 's economy depended on some of the few other resources that were existing in the region. However, with the increase in population the resources started running out and the UAE's economy experienced a small crush resulting in losing on various jobs. Considering the general demand and the existing supply of oil in the UAE 's economy, it is predicted that oil markets are set to be on a continual rise in 2018, with market significance rather than geopolitics playing a significant role in boosting the general prices of oil.

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Currently, it is important to note that crude oil is identified to be at three years higher with Brent is now being sold above $ 63 per barrel in West Texas and $ 69 per barrel overall. On the other side, the non-Opec and the Opec individuals are cutting their production by a total of 1.8 million of the barrel on a daily basis to offer support on the oil prices (Basher, Haug & Sadorsky,2017).

Even though the UAE government has ended up to carry serious diversification on their national economy, with all assets that have been achieved from oil being invested into other industries such as trade, tourism and in the general manufacturing sectors, oil and gas have remained to be one great pillar for the development of infrastructure. Technically, the demand of oil still exists in the UAE since the larger share of oil that is produced in the territory of United Arab Emirates goes through the export process and even during the period of low prices. UAE has great sovereign wealth fund that is useful in shielding themselves from years when the general price is a little bit low.

When it comes to securing the general demand, UAE is acquiring the general demand for its oil production by making sure that the dependable subsidiaries abroad are secured, which is one main strategy that is put in place by the petrostates to take control of their economic development. However, UAE is supposed to raise the price of their oil to facilitate the end of the fossil fuel-based energy market that ended up to offer a good future to bring the OPEC government to an end. The oil prices are moving up and this is in favor of UAE as a result of the UAE oil inventories. On the other hand, the non Opec and the Opec's production has also cut their agreement due as a result of the rising geopolitical tensions(Jensen,2018). UAE has also cut up to around ten percent of their export for the last two months due to the output cut pact.

In relating the general supply and the existing demand, the price of oil has raised serious debate on whether 2018 will form one of the years that oil market will be balanced. From an economical approach, the 2017 market has been performing efficiently, however, the United Arab Emirates energy and Industry have not achieved the general balance between supply and demand.

References

Basher, S. A., Haug, A. A., & Sadorsky, P. (2017). The Impact of Oil-Market Shocks on Stock Returns in Major Oil-Exporting Countries: A Markov Switching Approach.

Jensen, S. (2018). Policy Implications of the UAE's Economic Diversification Strategy: Prioritizing National Objectives. In Economic Diversification in the Gulf Region, Volume II (pp. 67-88). Palgrave Macmillan, Singapore.