The said Tuesday it will leave OPEC effective 1 May, stripping the oil cartel of its third-largest producer and further weakening its leverage over global oil supplies and prices.
The UAE’s decision had been rumoured for some time, as it pushed back in recent years against OPEC production quotas it felt had been too low, meaning it wasn’t able to sell as much oil to the world as it wanted.
“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,” Capital Economics wrote in an analysis. “The ties binding OPEC members together have loosened,” it said, particularly after Qatar withdrew from the cartel in 2019.
Regional politics are also likely at play. The UAE has had increasingly frosty relations with Saudi Arabia, OPEC’s largest producer, over political and economic matters in the Mideast, even after both came under attack by fellow OPEC member Iran during the war.
Sources: U.S. Energy Information Administration; OPEC.
OPEC oil production
OPEC accounts for roughly 40% of the world’s oil output, but its market power has been waning in recent years as the United States ramped up production. While Saudi Arabia had been producing more than 10 million barrels of oil a day before the war, the U.S. pumps more than 13 million barrels a day.
The UAE, which became part of OPEC in 1967 through Abu Dhabi, was producing about 3.4 million barrels of crude per day before the U.S.-Israeli war with Iran began on 28 February. Analysts estimate its production capacity could reach around 5 million barrels per day.
Why did the UAE leave OPEC?
In a statement released Tuesday through its state-run WAM news agency, the UAE also said it would withdraw from the broader OPEC alliance, which Russia had helped lead to stabilise global oil prices.
“This decision reflects the UAE’s long-term strategic and economic vision and evolving energy profile,” the UAE statement said.
“During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all,” it added, as reported by AFP.
“However, the time has come to focus our efforts on what our national interest dictates.”
The UAE’s withdrawal removes one of OPEC’s few members with the ability to quickly increase production, said Jorge Leon, head of geopolitical analysis at Rystad Energy. “A structurally weaker OPEC, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilise prices,” he said, as reported by the Associated Press.
Saudi Arabia, UAE increasingly at odds
Saudi Arabia and the UAE have increasingly found themselves at odds over economic interests and regional politics, especially around the Red Sea. Although they joined forces in 2015 to fight Yemen’s Iran-backed Houthi rebels, that alliance unravelled by late December, when Saudi Arabia carried out airstrikes on what it said was a weapons shipment intended for UAE-backed Yemeni separatists.
When was OPEC formed?
The Organisation of the Petroleum Exporting Countries (OPEC) was established in Baghdad in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Today, it has 12 member countries—including the UAE—that collectively hold over 80% of the world’s proven oil reserves. Other members include Algeria, Equatorial Guinea, Gabon, Libya, Nigeria, and the Republic of the Congo.
Headquartered in Vienna, the group’s main objective is to manage and stabilise oil prices by coordinating production-level changes among its members.
What was the goal of OPEC?
The aim has been to maintain oil prices at a level that allows member governments to fund their budgets and benefit from their natural resources, while still keeping them low enough to avoid triggering recessions in oil-importing countries or reducing energy use, a situation known as demand destruction, AP reported.
That approach has sometimes drawn pushback from U.S. leaders, where the price of gasoline is highly political. US President Donald Trump at one point accused of “ripping off the rest of the world,” and his predecessor Joe Biden also badgered OPEC to produce more oil, AP reported.
OPEC says its objective is “to coordinate and unify petroleum policies among member countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.”
OPEC signalled a change
The formation of OPEC marked a shift from a global oil industry dominated by Western companies to one in which resource-rich countries gained greater control over their oil and revenues.
At various points, OPEC’s production decisions have significantly impacted the world economy. In 1973, its Arab members imposed an oil embargo on the United States and other countries supporting Israel during the Yom Kippur War, causing oil prices to quadruple and leading to fuel shortages and long queues at U.S. gas stations.
In 2016, OPEC expanded its cooperation by partnering with 10 other oil-producing nations, including Russia, to form the broader alliance OPEC+.
UAE chafed at cartel’s restrictions on production
The UAE is seeking more independence in how much oil it sells. Cartels keep prices higher, but they restrict members’ earnings and market share against non-cartel members. There has been longstanding friction between the UAE and Saudi Arabia, the biggest OPEC producer and de facto leader of the cartel, AP reported.
One reason for producing more now: Experts expect oil consumption to peak in the coming years as the world transitions to renewable energy sources that do not emit carbon dioxide, the greenhouse gas driving climate change. That means barrels underground could be worth more today than they might be later, when oil consumption declines, so restraining production might mean losing out on profits, according to a report by AP.
OPEC might lose some of its leverage over prices
The UAE’s withdrawal removes one of OPEC’s few members with the ability to quickly increase production — the mechanism through which the cartel manages oil prices, said Jorge Leon, head of geopolitical analysis at Rystad Energy, AP reported.
“A structurally weaker OPEC, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilise prices,” Leon said. “The net effect points to a more fragmented supply landscape and a potentially more volatile oil market over time as OPEC’s capacity to smooth imbalances diminishes.”
Departure will not add oil to the market while the strait is blocked
Iran is blocking the , a vital route used by oil tankers carrying about a fifth of the world’s oil and gas supplies. This disruption is stopping large volumes of crude from Gulf producers like Saudi Arabia and the UAE from reaching international markets. As a result, oil prices have climbed sharply in the short term, making this the most immediate factor driving the price surge.
If the UAE achieves its goal of producing more oil after the war, that could speed a return to price levels more in line with those before the war, said Michael Brown, research strategist at Pepperstone foreign exchange brokerage, AP reported.
“As for crude in the here and now, all that really matters is whether the Strait of Hormuz is open or closed,” he said. “At present, it’s essentially shut, tightening supply conditions day by day and probably seeing benchmarks continue to grind higher on a daily basis as well.”
What do experts think?
Jorge Leon, an analyst at Rystad Energy, said its withdrawal may not immediately impact oil markets while Hormuz shipments remain on hold, AP reported.
But the UAE will now be free to raise production, “raising broader questions about the sustainability of Saudi Arabia’s role as the market’s central stabiliser — and pointing to a potentially more volatile oil market as OPEC’s capacity to smooth supply imbalances diminishes”.
Jamie Ingram, managing editor of the Middle East Economic Survey, reported that OPEC is losing 13% of its production capacity due to the UAE’s departure, citing the International Energy Agency.
No immediate impact likely for world oil markets
The UAE’s withdrawal from OPEC won’t necessarily have any immediate effects on markets. That’s because world oil supplies are sharply constrained by the war in Iran, which has closed off the Strait of Hormuz, a waterway through which one-fifth of global oil supplies — including much of the UAE’s — is transported.
On Wednesday, Global oil prices surged amid fears of supply disruptions. has climbed from the low $70s a barrel before the Middle East conflict to above $110, market data show.
Angola was the last OPEC member to withdraw from the cartel in 2024.
(With inputs from agencies)
