The shocking decision by the United Arab Emirates to leave OPEC caught its six-decade partners by surprise. Now, the cartel will have to struggle to stay relevant in a rapidly transforming global oil market.
Officials from other member countries were stunned on Tuesday, as long-standing tensions between Abu Dhabi and the group’s de facto leader, Saudi Arabia, culminated in the sudden announcement that the third-largest producer in OPEC would exit the organization within days.
For OPEC and its partners, the departure will reduce its ability to manage oil prices by adjusting supply, while positioning the United Arab Emirates as an unpredictable actor — long uncomfortable with the constraints imposed by OPEC quotas — at a moment of unprecedented changes in the global market.
Future of OPEC
In the short term, production by the United Arab Emirates and its Gulf neighbors is being constrained by the closure of the Strait of Hormuz, leaving the rest of the world scrambling for supplies and rendering OPEC quotas irrelevant. However, when the flow of oil resumes, the UAE’s departure could open the way for a new contest for market share and future price wars. Officials have already signaled an intention to increase production.
Several representatives from other OPEC+ members said they did not expect a mass exodus immediately after the UAE’s decision.
That said, the departure of one of the bloc’s most influential members raises broader questions. OPEC’s power has been eroding in recent years as new productions flooded the market — especially U.S. shale oil. Saudi Arabia, which positions itself as the guardian of the global market, has struggled to restrain members that overproduce, while the group has already seen some smaller members leave the organization in the last decade.
“The market power of OPEC will decrease,” said Greg Brew, an analyst at Eurasia Group. “The UAE’s departure undermines the group’s credibility, since the country accounted for a significant share of OPEC’s total capacity.”
This account is based on conversations with about a dozen people familiar with the matter, most of whom requested anonymity due to the private nature of the information.
Exit Had Been Building for Years
The decision by the UAE to leave OPEC had been years in the making, according to some of these sources, dating back to the early part of the decade when turbulence caused by the Covid-19 pandemic deepened divergences over oil policy between Abu Dhabi and Riyadh.
These tensions reflect a clash of visions: on one side, the UAE’s ambition to maximize its hydrocarbon reserves before the energy transition reaches a critical point; on the other, Saudi Arabia’s preference for carefully managing oil production and prices. This occurs alongside the two countries’ contest for the role of the Middle East business hub and for political influence in the region.
The UAE’s stance was shaped by a powerful figure: Sultan Al Jaber, the chief executive of Abu Dhabi National Oil Co., who frequently expressed dissatisfaction with the limitations imposed by OPEC+ quotas.
After investing billions in new production capacity, the country was eager to recover those investments and pushed production beyond the established limits — receiving a rare public rebuke from Saudi Arabia. Abu Dhabi even considered leaving the alliance, but did not carry out the decision at the time.
Preparations for the exit gained momentum late last year. The decisive turning point, according to Energy Minister Suhail Al Mazrouei, was the war in Iran.
The effective closure of the Strait of Hormuz — a route linking the Persian Gulf to international markets — forced regional producers, such as Saudi Arabia, the United Arab Emirates, Iraq and Kuwait, to halt about 10 million barrels per day, or 10% of the world’s supply, according to the International Energy Agency.
With production limited, this shutdown made the UAE’s exit less disruptive. Moreover, outside OPEC+, the country could meet the demand recovery for fuel after the war without being bound by production quotas.
“If production capacity is moving out of the cartel’s influence, that is negative for prices over a three-to-five-year horizon,” said Clayton Seigle, of the Center for Strategic and International Studies. “This doesn’t mean that OPEC+ cannot continue to manage the market, but the obvious fear is a domino effect, with other members following the same path. That’s the main issue.”
Market Balance
The importance of OPEC lies in its ability to balance the market, especially by cutting production when demand falls — as happened during the 2008 financial crisis and the 2020 pandemic.
Now, the responsibility to balance supply and demand will fall on a smaller group within OPEC+, led by Saudi Arabia and Russia. While Riyadh bears the weight of the adjustments, other major members — such as Iraq, Kazakhstan, and Russia — have shown less consistent commitment.
Saudi Arabia has also expressed frustration with the loss of market share, as alliance partners and other producers increased their production. Last year, the kingdom led an important strategic shift in OPEC+, expanding supply and abandoning the traditional price-support policy.
Despite the UAE’s rapid capacity expansion and its ambition to produce more, it is unclear how much additional space exists. Estimates vary, but many analysts believe the country was already operating near its limit before the war. In February, it produced 3.64 million barrels per day, according to the International Energy Agency — a figure above the official data.
“The UAE’s production has been at the limit for a long time — they ignored OPEC+ quotas,” said Gary Ross, a veteran industry consultant. “In practice, whoever balances the market is Saudi Arabia. In the end, OPEC is Saudi Arabia.”
Still, the exit does not signal an immediate collapse of the alliance. Delegates say they do not intend to follow the same path nor do they see a risk of a mass departure.
The true test of OPEC’s strength will come the next time it needs to intervene. The consequences of the war in Iran indicate that the market will still require all possible oil for some time, even after the Strait of Hormuz reopens.
“What is not clear is when we will have an over-supplied market again and a need for production controls,” said Bob McNally, president of Rapidan Energy Group. “That could take many years.”
