The United Arab Emirates said it will leave OPEC on May 1, in a move that strips the oil cartel of its third-largest producer and deals a blow to Saudi Arabia’s ability to manage global oil prices, according to multiple reports.
The UAE government said the decision was both political and economic, according to multiple reports. In an official statement, Abu Dhabi said the departure 'reflects its long-term strategic vision, including accelerated investment in domestic energy production, with additional production to be brought to market gradually.' The statement also noted the move 'enhances the UAE's ability to respond to evolving market demands.'
The ties binding OPEC members together have loosened, particularly after Qatar withdrew from the cartel in 2019.
The Emirati leadership has long believed that OPEC decision-making has historically privileged Saudi Arabia and not served Abu Dhabi’s economic interests, according to people familiar with the matter. Rumors of a possible exit had circulated for years due to protracted disputes over production quotas, according to multiple reports. Research suggests the UAE began studying whether to leave OPEC around the time Qatar withdrew from the cartel in early 2019. However, the specific quota levels or policies that triggered the final decision remain unclear.
The departure follows years of frustration with other members over oil-production policy and the response to the U.S.-Israel-Iran conflict, Western media reported. According to multiple reports, as the war continued, Saudi Arabia joined other nations in seeking a diplomatic solution, while the UAE sought stronger security guarantees, believing the Saudis were willing to settle for less. This divergence eroded the trust and solidarity that had developed in early March, according to multiple reports. The UAE was unable to build political solidarity for joint counterattacks against Iran, leading it to abandon the economic solidarity of the oil producers' club, according to multiple reports.
The UAE is itching to pump more oil.
Ties between the UAE and Saudi Arabia have been frosty, with political and economic disputes simmering even as both nations came under Iranian attack, according to multiple reports. According to multiple reports, the UAE was the Gulf state most heavily assaulted by Iran, fending off over 2,200 drones and missiles, partly due to its geographical proximity. While the UAE pushed privately for joint counterattacks against Iran, Saudi Arabia instead pursued diplomacy alongside Pakistan, Egypt, and Turkey, according to research.
The announcement came without prior consultation as the Gulf Cooperation Council met in emergency session in Jeddah, the first such gathering since the Iran attacks, according to multiple reports. No public GCC consensus emerged to take steps that could be seen as siding with Israel, according to multiple reports. According to research, the UAE had privately urged Saudi Arabia and Qatar to launch joint counterattacks against Iran, but the lack of a unified military response further strained relations.
The UAE withdrawal removes one of OPEC's few members with the ability to quickly increase production.
The UAE's state-run Adnoc plans to increase its oil production capacity to 5 million barrels per day by 2027. The country has invested heavily in expanding energy production capacity and wants to pump more oil, according to multiple reports. Leaving OPEC will allow it to accelerate those plans without being bound by collective output limits.
Analysts say the UAE has capacity to produce roughly 5 million barrels per day, but the exact figure is contested. Some assessments suggest the country could quickly increase output, while others note that its ability to ramp up rapidly is limited. According to The Independent - Main, Jorge Leon of Rystad Energy described the withdrawal as removing one of OPEC's few members with the ability to quickly increase production.
The UAE exit will increase oil output and reduces OPEC's effectiveness in managing the global oil market.
Just before the U.S.-Israeli war with Iran began on February 28, the UAE was producing around 3.4 million barrels per day, according to multiple reports. After the closure of the Strait of Hormuz, output slumped 44% to 1.9 million barrels per day in March, according to multiple reports. The waterway's closure has severely constrained the UAE's ability to export, highlighting its vulnerability to regional instability.
The Iran war wiped out 7.88 million barrels per day of OPEC production in March, a 27% fall and the biggest supply collapse for the group in decades, according to multiple reports. According to multiple reports, the Strait of Hormuz closure and the war are constraining oil supplies, so short-term price impacts depend mainly on reopening the waterway. Peace talks between the U.S. and Iran have stalled, with Tehran offering to reopen the strait if Washington lifts its blockade, while the U.S. appears to rule out any deal excluding Iran's nuclear program, according to multiple reports. The timeline for reopening remains uncertain.
The UAE is redefining its role from a producer within a bloc to a balancing producer that contributes to market stability, which may gradually weaken OPEC cohesion but strengthens the UAE's position.
Oil prices swung sharply on Tuesday following the UAE's announcement. Brent crude initially traded above $111 per barrel, but later slipped to $104 after news of the OPEC exit, according to multiple reports. The benchmark then rose 4% to above $105 on Tuesday on news of Trump's dissatisfaction with Iran's Strait of Hormuz proposal, according to multiple reports.
According to multiple reports, on Wednesday after the announcement, Brent crude fell 0.5% to $110.71 and U.S. crude fell 0.6% to $99.32. Despite this midweek dip, Brent has risen about $10 in the last week, underscoring the broader supply fears driven by the Hormuz closure and war, according to multiple reports.
The UAE’s withdrawal is a significant loss to OPEC and makes it structurally weaker.
On Tuesday, Wall Street retreated, with the S&P 500 down 0.5%, the Dow down 0.1%, and the Nasdaq down 0.9%, according to multiple reports. Asian stocks mostly advanced on Wednesday, according to multiple reports. The Federal Reserve was expected to announce a decision on interest rates on Wednesday, according to multiple reports. AI-related stocks led the losses on Tuesday, with Broadcom falling 4.4%, Nvidia 1.6%, and Micron Technology 3.9%, according to multiple reports.
OPEC's grip on the global oil market has weakened as non-OPEC supply from Brazil and the U.S. has surged, analysts said. The ties binding members together have also loosened, with Qatar's withdrawal in 2019 marking an earlier fracture, according to Capital Economics.
Analysts are divided on the long-term implications for OPEC. ING Bank strategists said the UAE exit will increase oil output and reduces OPEC's effectiveness in managing the global oil market. Bloomberg wrote: 'The UAE’s withdrawal is a significant loss to OPEC and makes it structurally weaker.' However, a Council on Foreign Relations assessment suggested it is unlikely to undermine OPEC itself or global oil flows. It remains to be seen whether other members will follow the UAE's lead.
The UAE's move positions it as the Gulf state closest to Donald Trump, a long-term critic of OPEC, according to multiple reports. According to The Guardian - World, Dr Ebtesam Al-Ketbi, President of the Emirates Policy Center, described the UAE as redefining its role from a producer within a bloc to a balancing producer that contributes to market stability, which may gradually weaken OPEC cohesion but strengthens the UAE's position. The details of the UAE's negotiations with the Trump administration regarding oil production and regional security have not been disclosed.