UAE withdraws from OPEC: The end of an era or the beginning of a greater split?

Author: Li Jia, Wall Street Insights

The United Arab Emirates announced it will officially withdraw from OPEC and the OPEC+ alliance on May 1. Analysts point out that this is not an isolated technical decision, but a direct result of the rise in nationalism and strategic autonomy among Middle Eastern oil-producing countries triggered by the Iran war. This move could prompt more countries to follow suit, further weakening OPEC’s collective action capability.

On April 28, according to Bloomberg, UAE Energy Minister Suhail Al Mazrouei stated that the market supply imbalance caused by the Middle East conflict provides a “suitable opportunity” for withdrawal. He noted that the current market is in a supply shortage, and the immediate impact of withdrawal on supply and demand patterns is relatively limited. The UAE believes that in the face of market volatility caused by the war, the country needs to respond more flexibly to market demands rather than being constrained by collective decision-making mechanisms.

After the announcement, WTI crude oil futures briefly declined before quickly rebounding, with Brent crude trading around $104 per barrel. Meanwhile, since the outbreak of the Middle East conflict, the UAE’s sovereign credit risk has risen significantly. Previously, the UAE had applied to the Federal Reserve for a currency swap quota to ease liquidity pressures in its domestic banking system.

Aiming for independent production policy and releasing capacity at its own pace

The UAE official news agency WAM issued a statement saying that the decision to withdraw from OPEC+ aligns with the country’s long-term strategic and economic vision, aiming to “enhance flexibility in responding to market dynamics,” and reaffirmed its continued participation in the global energy market in a “responsible and sustainable” manner.

The statement pointed out that the UAE is accelerating domestic energy investments and focusing on future market strategies, requiring the ability to independently set production policies. It also mentioned that geopolitical instability in the Strait of Hormuz and the Arabian Gulf is affecting supply patterns, while the global energy demand growth trend remains clear in the medium to long term—this statement has been interpreted by external observers as the UAE’s intention to gradually release capacity outside the OPEC framework, at its own pace.

The UAE joined OPEC in 1967 under the name Abu Dhabi, and continued its membership after the federation was established in 1971, making it over fifty years of membership. This long-standing membership adds historical significance to its withdrawal this time.

Long-standing disagreements between the UAE and Saudi Arabia, and the prelude to withdrawal

This withdrawal is not without precedent.

There has been a long-standing disagreement between the UAE and OPEC leader Saudi Arabia, mainly centered on production quotas and regional political influence competition. In various OPEC+ meetings, the UAE has repeatedly sought to deploy additional capacity investments, but was blocked by Saudi Arabia, which advocates for production limits. This conflict has previously pushed Abu Dhabi to the brink of withdrawal multiple times, and this time it has finally taken action.

Currently, the UAE’s daily production is about 4.05 million barrels, making it one of the largest members within OPEC, and it plans to increase capacity to 5 million barrels per day by 2027. OPEC now has 11 member countries, including Saudi Arabia, Iran, Iraq, Kuwait, Venezuela, Nigeria, Libya, Algeria, Congo, Equatorial Guinea, and Gabon.

As a major oil producer, the UAE’s departure effectively weakens OPEC’s ability to “maintain oil prices at the bottom through collective production cuts.” UBS analyst Matthew Cowley warned in a client report that especially during economic slowdowns, OPEC will find it more difficult to respond to oversupply.

Impact of withdrawal on OPEC coordination mechanisms, and the real challenge may emerge after the conflict

OPEC was established in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, originally to counter Western oil giants’ dominance over the global crude oil market. Today, the Middle East conflict has severely impacted Persian Gulf oil exports, with countries like the UAE, Saudi Arabia, and Iraq forced to significantly cut actual exports, and large-scale production increases in the short term are constrained.

This means that, the direct market impact of the UAE’s withdrawal from OPEC may only become apparent after the war ends and supply patterns normalize. Due to the Strait of Hormuz blockade, current actual exports are already heavily restricted; immediate large-scale capacity increases after withdrawal are neither realistic nor necessary. The true challenge to its independent capacity release at its own pace will fully emerge after supply normalizes post-war, at which point its ability to self-regulate remaining OPEC production will pose a direct threat.

The UAE’s departure further deepens external doubts about OPEC’s future cohesion and survival structure.