RJ Hamster
The Cartel Cracks: What the UAE Exit Means
The UAE is leaving OPEC… what will it mean for volatility?… POET’s 50% collapse… did you take profits?… OpenAI is struggling with revenues… will it generate enough to meet its compute obligations?
This morning, the United Arab Emirates (UAE) announced it will exit OPEC on May 1, ending nearly six decades of membership and dealing one of the most significant blows to the cartel in its history.
The UAE was OPEC’s third-largest producer before the Iran war disrupted Gulf shipping. Its departure strips the group of roughly 12% of its overall supply. More critically, it removes one of only two members – alongside Saudi Arabia – with meaningful spare production capacity.
As to the impact, here’s Jorge Leon, head of geopolitical analysis at Rystad Energy and a former OPEC secretariat official:
The longer-term implication is a structurally-weaker OPEC.
Outside the group, the UAE would have both the incentive and the ability to increase production, raising broader questions about the sustainability of Saudi Arabia’s role as the market’s central stabilizer.
The timing of this morning’s news doesn’t appear accidental for two reasons…
One, the announcement comes just days before a scheduled OPEC+ meeting this coming Sunday, where members are set to begin negotiating next year’s production quotas. Getting out now means the UAE won’t be bound by a new quota framework heading into 2027 – which dovetails into the second reason…
The war in Iran has closed the Strait of Hormuz to most exports, but the UAE can route more than half its oil overland, bypassing the blockade entirely. So, while Saudi Arabia, Iraq, and others are watching their exports get throttled by the war and can’t easily get oil to market regardless of their quotas, the UAE could potentially export more – but OPEC’s rules won’t let it.
The exit frees Abu Dhabi to pursue its ambition to reach 5 million barrels per day of capacity by 2027 without asking Riyadh for permission.
As to the impact on oil prices, here’s veteran trader Jonathan Rose of Masters in Trading: Live:
The UAE’s decision represents a fracturing of the world’s oil export order at one of the most fragile moments in years.
Volatility will rise quickly as traders reprice supply expectations, regional alliances, and the next move in crude.
Refiners have remained strong so far. But that leadership may not hold if the market starts rotating into a new energy narrative.
In this morning’s Masters in Trading LIVEepisode, Jonathan walked through the implications of the UAE decision, how it could reshape the energy trade, and the key stocks and sectors best positioned for the coming wave of volatility. You can watch it for free right here.
Bottom line: a structurally weaker OPEC is a long-term headwind for oil price management. We’ll keep tracking the implications as the energy picture evolves.
Now, let’s shift gears but stay with Jonathan…
While he spent this morning flagging new opportunities in energy, yesterday, his subscribers were reminded that knowing when to exit matters just as much as knowing when to enter…
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“Take your profits, or someone else will take them for you”
American financier Bernard Baruch is credited with that line. And yesterday, some traders who ignored that advice learned it the hard way.
The stock in question is POET Technologies Inc. (POET) – a small semiconductor company that designs optical engines to move data using light rather than copper wiring.
As AI data centers grow larger and faster, copper’s heat and power limitations are creating a bottleneck. POET has been building technology to solve it, putting the company squarely in the path of one of the most powerful demand forces in the market.
Regular Digest readers know this story well…
In our February 12 Digest, we profiled POET as a trade idea from veteran Jonathan Rose, editor of Masters in Trading: Live. By late last week, that trade had returned almost 170% since we highlighted it.
But also last week, we noted that Jonathan had recommended his subscribers take profits.
From his Trade Alert on Friday:
POET Technologies has now pushed into levels the stock hasn’t seen in more than a decade, capping off a move that’s been nothing short of vertical.
As much as I like this stock in the longer term, when a move like this falls in your lap, you don’t ask questions, you take profits.
We’ll look for more opportunities for POET down the line.
And then came yesterday…
POET imploded 47% after the management reported that Marvell Technology (MRVL) had canceled all purchase orders from Celestial AI – a company owned by Marvell and POET’s anchor customer.
Marvell accused POET of violating confidentiality obligations by publicly disclosing the order. With its most important customer relationship gone, POET collapsed by nearly half in a single session.
The momentum-chasing traders who bought from Jonathan’s subscribers last Friday are now sitting on losses that require almost a 100% gain just to break even.
This is an important reminder about how the pros manage trades – even ones that appear unstoppable.
Jonathan saw the signs – a narrative-driven spike, sentiment outrunning fundamentals, shares extended – and he protected his subscribers’ gains before the story unraveled. The traders who chased POET into the frenzy without a plan got caught.
Being part of a vertical move is exhilarating. But discipline is what gets you out before you become someone else’s buying opportunity.
Bottom line: Take your profits, or someone else will take them for you.
To follow along with Jonathan’s daily commentary and market analysis, click here to join him for his free Masters in Trading: Live videos, each day the market is open.
Finally, the AI monetization gap just got harder to ignore
Regular Digest readers know we’ve been tracking a question that most of Wall Street has been happy to defer…
Will end-user spending on AI ever justify the staggering sums being poured into the buildout?
Back in March, we pointed to the sudden shutdown of OpenAI’s video-generation model Sora as an early warning…
Downloads had collapsed 75% from their peak. OpenAI was burning $15 million a day to run it. And Bill Peebles, OpenAI’s own head of Sora, even admitted, “the economics are currently completely unsustainable.”
We called it Exhibit A in the gap between building AI and monetizing it.
Then, in yesterday’s Digest, we framed what to watch in this week’s Big Tech earnings – specifically, whether hyperscaler revenue signals would show consumer and enterprise AI spending finally catching up to the infrastructure bets being made on its behalf.
Well, the Wall Street Journal just published a report that lands right in the middle of everything we’ve been tracking.
According to the WSJ, OpenAI missed its internal goal of reaching one billion weekly active users for ChatGPT by year-end… missed its yearly revenue target after Google’s Gemini ate into its market share… and missed multiple monthly revenue targets earlier this year after losing ground to Anthropic in coding and enterprise.
That’s a lot of misses for a company sitting on $600 billion in future spending commitments.
Meanwhile, the company has also struggled with subscriber defection rates.
But the more unsettling detail is what’s happening internally.
Here’s the WSJ:
Chief Financial Officer Sarah Friar has told other company leaders that she is worried the company might not be able to pay for future computing contracts if revenue doesn’t grow fast enough.
The article reports that OpenAI has signed up for so much computing power that it expects to burn through $122 billion in the next three years, assuming that it meets ambitious revenue targets.
But those revenue targets are already being missed.
This is precisely the dynamic we’ve been flagging. The AI infrastructure layer is generating real revenue today. But the consumer-facing application layer – where the math ultimately has to close – remains stubbornly unproven.
To be clear: none of this means the AI trade is over, or that AI in general won’t generate revenues. But the question was never whether AI will work or have plenty of customers. It’s whether it will work and be profitable at a scale and speed that justifies the spending – before the money runs out.
Right now, the people closest to the numbers at OpenAI appear to be asking the same question we are.
We’ll keep tracking this – and bring you the key takeaways from this week’s Big Tech earnings later this week.
Have a good evening,
Jeff Remsburg
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