How will the United Arab Emirates’s (UAE) decision to withdraw from OPEC affect the global oil market and the OPEC+ group? Could this be the beginning of the end for OPEC?
These were the questions Rigzone posed to analysts from the Heritage Foundation, Wood Mackenzie, and Standard Chartered after the UAE Ministry of Energy and Infrastructure announced, in a statement posted on its X page which was translated from Arabic, that the country has made a decision to withdraw from OPEC and OPEC+, effective May 1.
“The UAE will be free to increase production without OPEC restrictions, so we can expect more supply when the Strait reopens and demand surges as nations around the world move to refill their depleted oil reserves,” E.J. Antoni, Chief Economist for the Thomas A. Roe Institute for Economic Policy Studies and the Richard Aster Fellow at the Heritage Foundation, told Rigzone.
“The UAE’s exit obviously weakens the OPEC+ cartel, which will have less control over global supply as one of its major producers becomes unshackled by production limits,” he added.
“Each time a member leaves a cartel, the benefit of being a cartel member is reduced. That means the situation could quickly snowball, and the cartel could fall apart entirely,” he continued.
“We’re still a very long way from that, but it’s certainly within the realm of possibility,” Antoni warned.
Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, told Rigzone that, “as the nation with the second largest liquids capacity in OPEC, the UAE’s exit is momentous”.
“However, it’s not entirely surprising as political tensions between the UAE and Saudi Arabia have been building over the last few years and have intensified in recent months amid the ongoing conflict in Iran,” he added.
Flowers told Rigzone that the UAE’s withdrawal from OPEC “will have minimal impact on market fundamentals in 2026, even if the Strait of Hormuz reopens”.
“Gulf countries, including the UAE, will take months to return to pre-war production volumes,” he pointed out.
“Beyond this year, losing the UAE will compound OPEC’s challenge to balance the market and increases the risk of oversupply weakening prices,” he added.
Standard Chartered Bank Energy Research Head Emily Ashford highlighted to Rigzone that “the ‘death of OPEC’ has been written about for years and is yet to come to pass”.
“Members leave and join regularly,” Ashford pointed out.
“However, the UAE has been part of the group since 1967, and its production is about 13 percent of OPEC supply (c.9 percent of OPEC+). Its departure will certainly have an effect on the relative clout of the group but will also increase Saudi Arabia’s importance in policy decisions,” Ashford added.
“In terms of global market supply, for Gulf producers that is being effectively controlled by shut-in supply and Strait of Hormuz transits, and not by individual country decisions,” Ashford said.
“In the longer-term, the country will be able to gradually increase supply through ventures such as shale oil supply, without the constraints of production caps or quotas, but these additional volumes are several years down the line, and not imminent supply held off the market to return quickly,” Ashford went on to state.
In a Standard Chartered report sent to Rigzone on Tuesday, Ashford outlined that the UAE’s withdrawal from OPEC and OPEC+ is “a move that suggests its desire to raise production and react to market conditions outside the framework of quotas and overproduction compensation cuts that have dominated the OPEC+ narrative for several years”.
“The acute pressure that Gulf producers have been under for the past two months, with shut-in production and export control taken away, has resulted in the announcement by the UAE … of its intention to leave OPEC and OPEC+,” Ashford added in the report.
“OPEC’s spare-capacity cushion (although it could be said that at present there is zero spare capacity), was primarily supported by Saudi Arabia and the UAE, so its exit reduces this even further,” Ashford continued.
In this report, the Standard Chartered Bank analyst highlighted that, at the last OPEC+ eight meeting, “the decision to allow all producers to add as much supply to the market as possible was seemingly deflected for another month”.
“We had suggested it might be a good opportunity to show the global markets that the group was going to try to supply as much as possible and shake off the confusing narrative and quotas that had existed since the 2023 tranches of voluntary cuts were announced,” Ashford said.
“Perhaps the decision to make just a small supply adjustment may have contributed to the UAE’s frustration with the group’s cautious strategy and decision to leave,” the analyst continued.
A statement posted on OPEC’s website on April 5 revealed that Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman decided to boost production by 206,000 barrels per day in May.
A table accompanying the statement outlined that “required production” in May will be 10.228 million barrels per day for Saudi Arabia, 9.699 million barrels per day for Russia, 4.326 million barrels per day for Iraq, 3.447 million barrels per day for the UAE, 2.612 million barrels per day for Kuwait, 1.589 million barrels per day for Kazakhstan, 983,000 barrels per day for Algeria, and 821,000 barrels per day for Oman.
In a statement posted on OPEC’s website on April 7, the OPEC Secretariat announced that it had received updated compensation plans from Iraq, the UAE, Kazakhstan, and Oman. These plans amount to 1.214 million barrels per day in March, 789,000 barrels per day in April, 895,000 barrels per day in May, and 899,000 barrels per day in June, a table accompanying that statement showed.
The UAE’s contribution to those plans amounted to 178,000 barrels per day in March, according to the table, which showed that the country had no compensation plans for April, May or June.
In a note sent to Rigzone by the Morningstar team on Tuesday, Morningstar Equity Director Joshua Aguilar highlighted that the UAE is one of the Middle East’s largest oil producers, behind Saudi Arabia and Iraq.
“We see the latest move as a continuation of the UAE’s energy ambitions as it’s evolved into one of the region’s diversified energy powerhouses, driven by electrification and economic growth,” Aguilar said in the note.
“Outside of Saudi Arabia, the UAE is one of the few members with meaningful spare capacity. This is the mechanism by which the group exerts influence over global oil prices,” he added.
“While the impacts from UAE withdrawal won’t be immediately felt given disruptions in the Strait of Hormuz, we’re confident there will be long-term reverberations – one that will witness a structurally weaker OPEC,” he warned.
“It also affords the UAE the ability to take advantage of its low-cost reserves,” he continued.
Aguilar outlined in the note that Morningstar thinks the UAE’s exit from OPEC is a foreign policy win for the U.S., “as losing one of the Middle East’s top oil producers undermines OPEC’s influence”.
“It marks a continuation of geopolitical alliances being redrawn, one that’s seen the U.S. drawn closer to countries outside the West,” he added.
Aguilar went on to state in the note that the UAE’s calculus “had likely been weighing the benefits of pursuing a different policy and monetizing its reserves for years”.
“Iran’s missile and drone attacks on its soil and on maritime shipping were likely the last straw,” he concluded.
Rigzone has contacted OPEC and the UAE Ministry of Foreign Affairs for comment on Antoni, Flowers, Ashford, and Aguilar’s statements, as well as the Standard Chartered Bank report. Rigzone has also contacted the Saudi Ministry of Foreign Affairs for comment on Flowers’ statement and the Standard Chartered report, and the White House for comment on Aguilar’s statement. At the time of writing, none of the above have responded to Rigzone.
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