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UAE to leave Opec and Opec+ next month
The United Arab Emirates will withdraw from the Organization of the Petroleum Exporting Countries (Opec) and its extended Opec+ alliance in May, ending nearly 60 years of membership. The move is expected to weaken the cartel's influence over global oil prices and marks a strategic pivot for the Gulf state.
Rationale behind the decision
UAE officials stated the exit would provide greater flexibility to meet rising global energy demand. The country has recently invested heavily in expanding its oil production capacity, aiming to increase output independently of Opec's quotas.
The UAE's energy minister emphasized that operating outside the group would allow the nation to pursue its long-term energy goals without constraints. Analysts suggest the decision reflects a broader strategy to prioritize market share over price stability.
Impact on Opec and global oil markets
The departure is seen as a significant blow to Opec, which relies on coordinated production cuts to manage prices. The UAE accounts for roughly 15% of Opec's total output and has historically been one of its most compliant members.
"This is the beginning of the end for Opec. With the UAE leaving, the alliance loses a key player, and its ability to control prices will be clearly weakened."
Saul Kavonic, Head of Energy Research, MST Financial
Neil Atkinson, former head of the International Energy Agency's (IEA) oil industry division, told the BBC that the UAE's exit would undermine Opec's effectiveness once normal production resumes post-conflict. He predicted the UAE would now seek to maximize sales, potentially clashing with Opec's efforts to sustain higher prices.
Geopolitical and economic implications
The move aligns with U.S. interests, as President Donald Trump has repeatedly criticized Opec for manipulating oil prices. The UAE's departure could strengthen ties between Abu Dhabi and Washington, particularly as the U.S. seeks to counterbalance Opec's dominance.
The World Bank warned that the ongoing Middle East conflict has already caused the largest oil supply disruption on record. Energy prices are projected to rise by 25% this year, with the poorest populations bearing the brunt of the impact. While the UAE's exit won't immediately affect supply-due to the closure of the Strait of Hormuz-it could lead to higher output in the long term.
Future of Opec and market volatility
The UAE produced 2.9 million barrels per day in 2024, compared to Saudi Arabia's 9 million. Experts estimate the UAE could increase production by an additional 1 million barrels daily outside Opec, further pressuring prices.
David Oxley, chief climate and commodities economist at Capital Economics, cautioned that while the UAE's departure alone may have limited impact, it could trigger a domino effect if other members follow suit. He warned of potential price volatility and a reshaping of Middle Eastern geopolitics.
"Saudi Arabia will now have to shoulder most of Opec's compliance and market management alone. If other members leave, the cartel's influence could unravel entirely."
Saul Kavonic, MST Financial
Professor David Elmes of Warwick Business School noted the UAE's low break-even oil price-nearly half that of Saudi Arabia-gives it a competitive edge. "The UAE can profit even at lower prices, so it's prioritizing volume over price control," he said.
Opec's origins and current membership
Founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, Opec was created to coordinate production and stabilize revenue for oil-exporting nations. The cartel has since expanded to include 11 members, with the UAE joining in 1967. Opec+ includes an additional 10 non-Opec countries, such as Russia.
The UAE's exit leaves Opec with 11 members, raising questions about the cartel's future cohesion and ability to manage global oil markets.
