UAE’s exit from OPEC and OPEC+ weakens cartel discipline, raising long-term price risks for energy investors
The world’s third-largest OPEC producer is walking away from the cartel just as a war has choked off a fifth of global oil flows, raising the odds of sharper price swings once supply routes reopen.
The United Arab Emirates (UAE) will leave OPEC and the wider OPEC+ alliance, with the move taking effect on May 1.
The UAE announced the decision through its state-run WAM news agency, saying it reflects a “long-term strategic and economic vision” and accelerated domestic energy investment, and that extra output will be added gradually in line with demand and market conditions.
As reported by Al Jazeera, the UAE framed the move as a shift to “focus on what our national interest dictates” after making “significant contributions and even greater sacrifices for the benefit of all” during its time in the organisation.
The New York Times noted that Abu Dhabi joined OPEC in 1967, before the UAE became a unified country, and has been a longstanding member.
BNN Bloomberg reported that quitting OPEC strips the cartel of its third-largest producer and further weakens its leverage over global supplies and prices.
CBC News added that OPEC accounts for roughly 40 percent of the world’s oil output, but its market power has been waning as the United States increased output.
BNN Bloomberg said the US now pumps more than 13m barrels a day, compared with more than 10m barrels a day from Saudi Arabia before the war.
The UAE has pushed back against OPEC quotas it viewed as too low.
The same article said it was producing about 3.4m barrels of crude a day just before the US-Israeli war with Iran began on February 28 and analysts say it can produce roughly 5m barrels a day.
The New York Times similarly reported the country was pumping around 3.6m barrels a day, about 3 percent of global supply, and aims to lift capacity to 5m barrels a day by 2027.
Capital Economics wrote, as cited by BNN Bloomberg, that “the bigger picture is that the UAE has been itching to pump more oil,” and argued that “the ties binding OPEC members together have loosened.”
Rystad Energy’s Jorge Leon said that dropping a member with around 4.8m–5m barrels per day of capacity removes a key lever for OPEC and leaves a weaker group with less spare capacity to fine‑tune supply and support prices.
CNBC reported that Saudi Arabia and the UAE together controlled a majority of global spare capacity of more than 4m barrels a day and quoted Leon saying the UAE’s departure “removes one of the core pillars underpinning OPEC’s ability to manage the market.”
For now, the war in Iran limits the immediate impact.
BNN Bloomberg reported that the Strait of Hormuz — a narrow chokepoint between Iran and Oman through which about a fifth of the world’s crude oil and liquefied natural gas normally passes — is effectively closed or “all but closed,” forcing Gulf producers, including the UAE, to slash output.
The same article Brent crude traded above US$111 a barrel on Tuesday, more than 50 percent above its prewar price.
CBC News noted that Statistics Canada data show gasoline prices in Canada jumped just over 21 percent in March from the previous month, the largest month-over-month increase on record.
UAE Energy Minister Suhail Mohamed al-Mazrouei said the exit followed “a careful look at current and future policies related to level of production.”
He told CNBC, that the UAE timed the move to limit disruption to other producers and insisted it did not stem from a dispute with Saudi Arabia.
Tensions in the Gulf still loom in the background.
BNN Bloomberg reported that Saudi Arabia and the UAE had jointly fought Yemen’s Iran-backed Houthi rebels before their coalition broke down when Saudi Arabia bombed what it described as a weapons shipment bound for Yemeni separatists backed by the UAE.
CBC News said Anwar Gargash, diplomatic adviser to the UAE president, criticized the Gulf Cooperation Council’s “weakest historically” political and military stance in protecting the country during the war.
Energy expert Heather Exner-Pirot told the same outlet that the war’s impact on global supplies means no immediate hit for Canada, but warned that when Gulf exports resume, extra UAE production outside OPEC quotas could unsettle oil markets and leave supply outstripping demand.
She argued the decision reflects a new geopolitical era in which alliances matter less and the world has become, in her words, “a Hunger Games, dog-eat-dog world.”
CTV News, citing economist Colin Mang, said OPEC is still likely to play an important role in determining how much oil reaches international markets and how that affects prices, but noted that high prices encourage members to break ranks and could prompt more countries to follow the UAE out of the cartel.
