Why did the UAE announce its departure from OPEC and how will it affect oil markets?

 

Why did the UAE announce its departure from OPEC and how will it affect oil markets?

The United Arab Emirates has announced its withdrawal from the Organization of the Petroleum Exporting Countries (OPEC and OPEC+) effective May 1, 2026, in what is being seen as a major setback for the multinational oil-exporting group.

A statement published on the Emirates’ official news agency said the decision to leave OPEC and OPEC+ was made “after a comprehensive review of the UAE’s production policy and its current and future production capacity.”

The statement also said the decision was made “based on our national interest and our determination to play our role in effectively meeting the urgent needs of the market.”

The UAE added that it would continue to act responsibly even after its withdrawal from OPEC and OPEC+, and that any additional oil production would be released to the market gradually and in line with demand.

The UAE's decision comes at a time when the Iran-Iraq war threatens to create an energy crisis in the world and the international economy is also reeling.

The UAE joined OPEC in 1967 through Abu Dhabi and remained a member of the organization after the UAE was formed in 1971.

UAE Energy Minister Suhail Al Mazrouei told Reuters that the decision was made after a careful and comprehensive strategic review of the energy sector, the oil sector and other sectors.

He said that the UAE has been a long-standing member of OPEC and OPEC+ and that this step is being taken at an opportune time and will not have a major impact on the market, especially in the context of the restrictions in

What is OPEC and OPEC Plus?

OPEC Plus is a group of 23 oil-exporting countries that meets regularly to decide how much crude oil to sell on the world market.

At the heart of the group are the 13 member countries of OPEC (Organization of the Petroleum Exporting Countries), mostly from the Middle East and Africa. OPEC was founded in 1960 as a cartel to control the supply and price of oil worldwide.

OPEC members produce about 30 percent of the world's crude oil. Saudi Arabia is the largest single oil supplier in the group, producing more than 10 million barrels per day.

In 2016, when oil prices were particularly low, OPEC joined forces with 10 other oil-producing countries to form OPEC Plus.

The expanded group includes Russia, which produces more than 10 million barrels of oil per day.

Collectively, OPEC+ countries produce about 40 percent of the world’s total crude oil.

“OPEC+ coordinates supply and demand to maintain market balance,” says Kate Dorrian of the Energy Information Administration.

“When demand for oil falls, supply is cut to keep prices high,” she says.

The organization can also reduce prices by increasing the amount of oil in the market.

What will be the impact of the UAE’s decision?

Saul Kwon, head of energy research at Australian company MST Financial, says that this is the “beginning of the end of OPEC.”

 

He says that “with the UAE’s departure, OPEC will lose about 15 percent of its production capacity and one of its most reliable members.”

According to the latest OPEC figures, the UAE produces 2.9 million barrels of oil annually, while OPEC’s de facto leader, Saudi Arabia, produces 9 million barrels of oil annually.

Saul Kwon says that after the UAE’s decision, “Saudi Arabia will have difficulty keeping the rest of OPEC members united and will have to practically bear most of the burden of managing the oil market alone.”

He added that other OPEC countries may also follow the same path.

Saul Kivonek says this is a “geographical shift in the Middle East and oil markets.”

OPEC was founded in 1960 by five countries: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, and its aim was to ensure stable incomes for its members by coordinating production.

The number of countries in the organization has fluctuated over the years, but in addition to the founding members, it also includes Algeria, Equatorial Guinea, Gabon, Libya, Nigeria and the Republic of Congo.

Other analysts say the UAE could gain more by separating from OPEC and OPEC+. “The UAE is planning to increase oil production by 30 percent and it was difficult to stay within the limits set by OPEC and APEC+,” Sergey Vakulenko, a fellow at the Carnegie Russia Euro-Asia Center, told Reuters.

“This is the least damaging time to announce this decision.” Oil prices are high and the closure of the Strait of Hormuz is causing a shortage of oil.

“After the Strait of Hormuz reopens, oil demand will remain high as countries will be replenishing the reserves that have been depleted since February, so prices will remain high,” he says.

Sergey also believes that the UAE’s departure will weaken OPEC.

“Other major oil producers like Iran and Iraq did not have spare production capacity. This capacity was mostly maintained by the UAE and Saudi Arabia.”

“This will pave the way for the UAE to increase its share of the global market once the geopolitical situation normalizes,” says Monica Malik, chief economist at Abu Dhabi Commercial Bank.

She added that the UAE’s decision “should be positive for both consumers and the globa