The United Arab Emirates' moment of derailment as a major oil-producing country exits OPEC

On April 28, 2026, the United Arab Emirates issued a statement through the national news agency WAM, officially withdrawing from the Organization of the Petroleum Exporting Countries (OPEC) and its extended alliance OPEC+ starting May 1.

This member, who has been within the organization for nearly 60 years, produces about 3.6 million barrels per day, accounting for roughly 12% of OPEC’s total output, making it the third-largest oil producer after Saudi Arabia and Iraq.

After the withdrawal, OPEC’s member countries will decrease from 12 to 11, and the organization’s share of global oil supply will further decline from approximately 30% to around 26%.

This is the largest member exit event OPEC has experienced in recent years.

From founding to core: 60 years of the UAE

OPEC was initially initiated in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, with the core goal of coordinating production and defending the common interests of oil-exporting countries.

In 1967, Abu Dhabi joined as an independent member, and four years later, the UAE was established, inheriting this membership.

Over the following decades, the UAE relied on large-scale capital investments from the Abu Dhabi National Oil Company, expanding its energy footprint. Currently, proven reserves have reached 113 billion barrels, ranking sixth globally, accounting for about 6% of the world’s total reserves.

Entering the 2020s, the UAE’s crude oil production stabilized around 3.6 million barrels per day, reaching a peak of about 4.12 million barrels in 2022.

Meanwhile, Abu Dhabi National Oil Company continued to push forward with expansion plans, aiming to increase capacity to 5 million barrels per day by 2027, with cumulative investments exceeding $150 billion.

While capacity is growing, how much can be sold and how to sell it are not entirely decided by the UAE itself.

Long-term tension between quotas and capacity

OPEC’s core operation relies on a quota system.

Based on members’ capacity, historical production, and market forecasts, each member is assigned a production ceiling, with exceeding this limit theoretically considered a violation.

This mechanism can maintain market stability during periods of high oil prices, but for members with rapid capacity expansion, it acts as an invisible revenue ceiling.

This is precisely the situation for the UAE. The latest quota is about 3.41 million barrels per day, while actual capacity has approached 4.85 million barrels, leaving a gap of approximately 1.4 to 2 million barrels per day.

At an international oil price of $70 to $80 per barrel, this unused capacity could result in a potential annual revenue loss of between $46 billion and $58 billion.

The conflict between the UAE and OPEC peaked in 2021.

At that time, demand rebounded after the COVID-19 pandemic, and OPEC discussed whether to continue production cuts. The UAE explicitly refused to accept the current quota, demanding an increase from 3.2 million to 3.8 million barrels.

Negotiations stalled for two weeks, ultimately allowing Saudi Arabia to permit the UAE to raise its quota to 3.65 million barrels.

Since then, the UAE has regularly exceeded its quota, with daily production exceeding the limit by tens of thousands of barrels becoming routine by 2024.

Precedents before the withdrawal

In OPEC’s history, members withdrawing is not new.

Indonesia joined in 1962, then experienced withdrawal and rejoining, finally leaving again in 2016.

Ecuador withdrew in 2019.

Qatar announced its departure in 2019 after becoming the world’s largest liquefied natural gas exporter, citing a strategic shift toward natural gas rather than oil.

Angola withdrew in 2024, also due to dissatisfaction with quota allocations.

But the UAE’s scale is not comparable to these countries.

Qatar’s production at withdrawal was about 600k barrels, Angola around 1.1 million barrels, while the UAE approaches 3.6 million barrels—several times the total of previous members’ combined production at withdrawal.

This is because the UAE has a higher degree of economic diversification and is less dependent on high oil prices to balance its fiscal budget compared to Saudi Arabia, making it more inclined to prioritize volume over price.

War disrupted the rhythm but was not the fundamental cause

On February 28, 2026, the U.S. and Israel launched a military strike against Iran, triggering conflicts that quickly spread throughout the Gulf region.

The Strait of Hormuz, the world’s most important oil transit route, normally carries about one-fifth of global crude oil and liquefied natural gas transit, but as the conflict escalated, the strait effectively entered a state of closure.

UAE exports were almost immediately severely impacted. Although there is a land pipeline bypassing the Strait of Hormuz with a maximum capacity of about 1.8 million barrels per day, it is far from enough to compensate for the losses caused by maritime disruptions.

By March 2026, its crude oil production plummeted to about 1.9 to 2.34 million barrels per day, a decline of approximately 35% to 47% from the pre-war level of 3.6 million barrels. In comparison, Saudi Arabia’s decline was about 23%, and Iran, as a belligerent, saw only about a 6% decrease.

Data from the International Energy Agency shows that OPEC+’s share of global oil production fell from about 48% in February 2026 to 44% in March, with further declines expected in April and a further reduction in May as the UAE officially exits.

The disruption of the Strait of Hormuz is a catalyst, but only a catalyst.

UAE Energy Minister Suhail Mazrouei explicitly stated that this decision was made after a comprehensive review of the UAE’s oil production policies and current and future capacity, with policy considerations predating the current geopolitical conflict.

What changes will occur in OPEC’s structure?

Evaluating the actual significance of the UAE’s exit for OPEC hinges on idle capacity.

Idle capacity refers to spare production that can be quickly brought online in a short period, serving as a crucial stabilizer for the oil market during supply shocks. Globally, effective idle capacity totals about 4 to 5 million barrels per day, with a significant proportion concentrated in Saudi Arabia and the UAE.

After the exit, this portion of the UAE’s idle capacity will no longer be constrained by OPEC quotas and can operate independently of the organization’s decision-making system.

The UAE is the only member within OPEC besides Saudi Arabia with substantial idle capacity. After withdrawal, OPEC’s overall capacity to control production will decline, and combined with the continued increase in non-OPEC oil production, especially in the U.S., the scope for coordinated supply management will further narrow.

The U.S. currently produces over 13 million barrels per day, surpassing Saudi Arabia’s approximately 9 million barrels, and in recent years, this has significantly eroded OPEC’s bargaining position.

Now, Saudi Arabia will become almost the sole member within OPEC with large-scale idle capacity, bearing a heavier responsibility for market management but with fewer mobilizable support resources.

On the day of the announcement, how did oil prices move?

On the day the news was announced, Brent crude futures initially dipped briefly, then rose about 2% above the previous day’s close, with the daily price above $111 per barrel.

The Strait of Hormuz remains effectively blocked, and the UAE cannot substantially increase exports in the short term. The impact of OPEC’s withdrawal on immediate supply is nearly zero. Overall, oil prices are still dominated by geopolitical risks, more than 50% higher than pre-2026 February levels.

However, in the medium to long term, once the strait returns to normal, the UAE’s independent increase in production is expected to exert downward pressure on prices.

Futures markets are relatively cautious about medium- and long-term reactions. If the UAE fulfills its 5 million barrels per day capacity target and significantly increases output, the additional supply would account for about 1% to 2% of global demand, a scale sufficient to influence price trends during periods of supply-demand balance.

The UAE’s next steps in increasing production

After the exit, the UAE can decide its production levels independently, no longer constrained by quotas. The pace and scale of increase will mainly depend on when the Strait of Hormuz reopens, the progress of Abu Dhabi National Oil Company’s capacity expansion, and demand conditions in major global markets.

In recent years, Abu Dhabi National Oil Company has been expanding upstream investments, with producible capacity approaching 4.85 million barrels per day. The goal of 5 million barrels daily by 2027 has long been set, and the true significance of the exit is to enable this capacity to be released into the market without restrictions.

The UAE also has the Haba Mountain pipeline connecting inland oil fields to the Fujeirah port, bypassing the Strait of Hormuz into the Gulf of Oman, with a maximum daily capacity of about 1.5 to 1.8 million barrels. Under the current blockade of the strait, this pipeline is the UAE’s limited export channel, but it is not enough to support full-scale increased production.

The World Bank’s report indicates that the scale of oil supply losses caused by the Iran conflict is the largest recorded, with global energy prices expected to rise by about a quarter this year. It is estimated that it will take about six months for the strait to recover to pre-war levels.

This time window will be critical for the UAE to adjust its pace and fully ramp up production.