UAE quits OPEC in blow to cartel that could reshape global oil markets
A photograph taken from the town of Al Jeer in the northern emirate of Ras Al Khaimah shows a tanker passing through the waters of the Strait of Hormuz on February 25.
London/Abu Dhabi (CNN) — The United Arab Emirates will leave OPEC, a decades-old cartel of the world’s top oil exporters, delivering a shock that will ripple through global oil markets at a time of unprecedented turmoil caused by the Iran war.
The UAE plans to withdraw from the Organization of the Petroleum Exporting Countries, or OPEC, on Friday, the UAE’s state news agency WAM reported Tuesday. The decision also extends to OPEC+, a larger group that consists of other oil producers such as Russia.
The decision followed a review of the UAE’s “current and future (production) capacity and is based on our national interest,” according to a statement from the news agency.
OPEC is a group of the world’s biggest oil exporters that coordinates output in order to influence global supply and prices. The move will allow the UAE — one of OPEC’s top three producers — to break free from the output limits imposed by the cartel, whose de facto leader is Saudi Arabia.
The UAE’s withdrawal “marks a significant shift for the oil-producer group,” said Jorge Leon, head of geopolitical analysis at consultancy Rystad. “Alongside Saudi Arabia, it is one of the few members with meaningful spare (production) capacity, the mechanism through which the group exerts market influence and responds to supply shocks,” he wrote in a note.
OPEC quotas had most recently limited the UAE to 3.2 million barrels of production a day, when it has capacity to produce closer to 5 million barrels a day, Robin Mills, the CEO of Dubai-based consultancy QamarEnergy told CNN’s Connect the World. The potential additional supply amounts to around 1-2% of global oil demand.
The implications for global energy markets of the UAE pumping more oil will likely be limited in the short-term, however, given that the Strait of Hormuz still remains largely shut. A large share of the oil and natural gas exported by Gulf producers transits through the strait in normal times.
But once the strait reopens, global supplies will likely be higher than would otherwise have been the case, David Oxley, chief climate and commodities economist at consultancy Capital Economics, wrote in a note.
“The UAE is well placed to increase supplies and live with lower oil prices… given its relatively diversified economy and lower reliance on oil revenues,” he added.
Oil prices were unchanged by the news. Brent crude, the global oil benchmark, was up 2.6% to $111 a barrel at 11.30 a.m. ET, in line with its level earlier in the day and a three-week high. WTI, the US benchmark, was up 3.3% to $99.5 a barrel.
OPEC’s future in the balance
The implications for the global oil market would be even bigger if the UAE’s decision “was the trigger for further disintegration of the group,” or a ramp-up in oil production by Saudi Arabia and Russia, which could contribute to lower oil prices but higher oil market volatility, Oxley said.
In an interview with Connect the World, UAE Energy Minister Suhail Al Mazrouei cast the move in terms of positioning the country as a leading producer at a time of growing concern about rising oil prices and tighter supply. He said the decision came after “looking at what is happening to the Strait of Hormuz and the level of withdrawal of the strategic reserves.”
Al Mazrouei said the move would help oil importing nations while not having a major impact on oil prices, because of the constraints on producers sparked by the closure of the strait. “Taking the decision now will help… the producers, to not feel the pressure on prices.”
OPEC collectively accounts for just over a third of world crude oil production and 79% of total proven crude reserves, according to its own figures. The UAE has been a member of the group since 1967. Other former members include Angola, which left in 2024, and Qatar, which left in 2019.
The UAE’s departure will reduce OPEC’s control of global supply from around 30% to 26%, said Dan Pickering, the chief investment officer at Pickering Energy Partners, an investment firm. The decision would have had a greater impact had it happened before the war, but it will still “somewhat” erode OPEC’s market power, he told CNN.
The announcement reflected an “intensifying focus on national interests” among Gulf countries sparked by the energy crisis, according to Robert Mogielnicki, the head of Polisphere Advisory, a Paris-based consulting firm. “This decision has been in the works for some time, but it comes at a pivotal moment for the (Middle East) and OPEC itself,” he said.
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David Goldman contributed reporting.
