The United Arab Emirates has announced its withdrawal from the Organization of the Petroleum Exporting Countries (OPEC), effective May 1, dealing a significant blow to the oil cartel by removing its third-largest producer and further diminishing its influence over global oil supplies and prices.
Background of the Decision
The UAE's decision had been anticipated for some time, as the nation had increasingly pushed back against OPEC production quotas it deemed too restrictive. These quotas prevented the UAE from selling as much oil as it desired on the global market. Capital Economics noted in an analysis that the UAE had been eager to pump more oil after investing heavily in expanding its energy production capacity. The consultancy added that the bonds uniting OPEC members have weakened, particularly after Qatar's withdrawal from the cartel in 2019.
Regional Tensions
Regional politics are also a likely factor. Relations between the UAE and Saudi Arabia, OPEC's largest producer, have become increasingly strained over political and economic issues in the Middle East. This tension persists even after both nations faced attacks from fellow OPEC member Iran during the ongoing war. The UAE's exit underscores a growing rift between the two Gulf allies.
Immediate Market Impact Unlikely
The UAE's withdrawal is not expected to have an immediate effect on world oil markets. Global oil supplies remain sharply constrained by the war in Iran, which has closed the Strait of Hormuz—a crucial waterway through which one-fifth of the world's oil, including much of the UAE's production, is transported. On Tuesday, Brent crude traded above $111 per barrel, more than 50% higher than its prewar price.
OPEC accounts for roughly 40% of global oil output, but its market power has been waning as the United States ramps up production. The U.S. now pumps over 13 million barrels per day, compared to Saudi Arabia's prewar production of more than 10 million barrels daily. U.S. President Donald Trump has been a consistent critic of OPEC during his two terms in office.
UAE's Production Capacity
The UAE, which joined OPEC through its emirate of Abu Dhabi in 1967, was producing around 3.4 million barrels of crude per day just before the U.S.-Israeli war with Iran began on February 28. Analysts estimate the UAE has the capacity to produce roughly 5 million barrels per day. In its announcement via the state-run WAM news agency, the UAE stated it would also leave the wider OPEC+ group, which Russia had led to stabilize oil prices. The decision reflects the UAE's long-term strategic vision and evolving energy profile, including accelerated investment in domestic energy production. The nation pledged to bring additional production to market gradually and measuredly, aligned with demand and market conditions.
Implications for OPEC
The UAE's withdrawal removes one of OPEC's few members with the ability to quickly increase production, according to Jorge Leon, head of geopolitical analysis at Rystad Energy. He noted that a structurally weaker OPEC, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilize prices.
Competition with Saudi Arabia
Saudi Arabia and the UAE have increasingly competed over economic issues and regional politics, particularly in the Red Sea area. The two countries jointly fought against Yemen's Iran-backed Houthi rebels in 2015, but that coalition broke down in late December when Saudi Arabia bombed a weapons shipment bound for UAE-backed Yemeni separatists. As tensions rose, Saudi broadcasters based in Dubai have pulled back to the kingdom. Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy, said the OPEC exit fits into the UAE's need for flexibility with key energy consumers, including a future relationship with China and a more competitive relationship with Saudi Arabia.
While Saudi Arabia and OPEC had no immediate reaction, Emirati Energy Minister Suhail al-Mazrouei insisted the decision did not stem from any dispute with its Gulf neighbor. However, the UAE sent its foreign minister rather than its ruler to a Gulf Arab leaders' meeting in Jeddah, Saudi Arabia, hosted by Saudi Crown Prince Mohammed bin Salman.
Climate and Energy Transition
The UAE hosted the United Nations COP28 climate talks in 2023, which ended with a pledge by nearly 200 countries to move away from fossil fuels. Despite this, the UAE plans to increase its production capacity in the coming years, even as it pursues more clean energy at home—a move criticized by climate activists. U.S. Interior Secretary Doug Burgum told an Abu Dhabi oil conference in November that there is no energy transition, only energy addition, drawing applause from Emirati hosts.
