UAE withdraws from OPEC, the moment of derailment for an oil-producing giant

Writing: Bibi News

On April 28, 2026, the United Arab Emirates issued a statement through the national news agency WAM, announcing its official withdrawal from OPEC and its extended alliance OPEC+ starting May 1.

This member, which had 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 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 investment from Abu Dhabi National Oil Company (ADNOC), 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 daily production remained stable around 3.6 million barrels, reaching a peak of 4.12 million barrels in 2022.

Meanwhile, ADNOC has continued to push for capacity expansion, aiming to increase production 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 mechanism.

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 stabilize the market 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 international oil prices of $70 to $80 per barrel, this unused capacity results 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 overproduction of tens of thousands of barrels becoming routine by 2024.

Precedents before withdrawal

In OPEC’s history, member withdrawals are not new.

Indonesia joined in 1962, experienced withdrawal and rejoining, and finally left 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.

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

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

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 a conflict that quickly spread across the Gulf region.

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

UAE exports were almost immediately severely impacted. Although there is an overland pipeline bypassing the Strait of Hormuz with a maximum capacity of about 1.8 million barrels per day, it is far insufficient 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 in the conflict, 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 May as the UAE’s official withdrawal takes effect.

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

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

What will change in OPEC’s structure

The core indicator for assessing the actual impact of the UAE’s withdrawal on OPEC is 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 is about 4 to 5 million barrels per day, with a significant portion concentrated in Saudi Arabia and the UAE.

After withdrawal, 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. Post-withdrawal, OPEC’s overall capacity to control production will decline, and with non-OPEC producers, especially the U.S., continuing to increase output, 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 power.

Now, Saudi Arabia will become almost the sole member with large-scale idle capacity, bearing a heavier responsibility for market management but with fewer supporting resources to mobilize.

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

On the day the news was announced, Brent crude futures initially dipped briefly, then rose about 2% from the previous day’s close, closing 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 withdrawal on immediate supply is nearly zero. Overall, oil prices are still dominated by geopolitical risks, more than 50% higher than pre-February 2026 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 capacity target of 5 million barrels per day and significantly increases output, the additional supply—about 1% to 2% of global demand—could influence price trends during periods of supply-demand balance.

The UAE’s next steps in increasing production

Post-withdrawal, the UAE can decide its production levels independently, no longer bound by quotas. The pace and scale of increased output will mainly depend on when the Strait of Hormuz reopens, the progress of ADNOC’s capacity expansion, and global demand conditions.

ADNOC has been expanding upstream investments in recent years, 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 real significance of withdrawal is to enable this capacity to be released freely into the market.

The UAE also has the Habshan 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, this pipeline is the UAE’s limited export channel, but it is insufficient to support full-scale increased production.

The World Bank’s report indicates that the scale of oil supply loss caused by the Iran conflict is the largest recorded, with global energy prices expected to rise by about 25% 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.