UAE leaves OPEC: How oil market will change

UAE cuts ties with the cartel

The United Arab Emirates said it will leave OPEC on May 1. For the organization, this is not a minor loss: the country has been a member since 1967 and was one of the largest producers within the cartel. According to the IEA, before the war the UAE produced around 3.6 million barrels per day on average — roughly 3% of global supply.

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To understand the scale of this move, it’s important to know what OPEC is. It is a group of oil-exporting countries that influences the market through production quotas. Simply put, members are assigned limits on how much oil they can produce and supply. If there is too much oil and prices fall, production is cut. If the market needs more supply, restrictions can be eased.

The UAE played a special role in this system. It was one of the few OPEC members with spare capacity — meaning it could quickly increase production when needed. According to Rystad Energy, Saudi Arabia and the UAE together controlled most of the world’s spare capacity, totaling more than 4 million barrels per day. But why did this cooperation come to an end?

What broke inside the cartel

The decision to leave was not sudden — tensions within OPEC had been building for years. The UAE invested billions of dollars to expand production and plans to raise capacity to 5 million barrels per day by 2027. However, existing quotas prevented the country from fully utilizing this potential.

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Another issue is poor compliance among members. Some OPEC+ countries, including Iraq and Russia, have repeatedly exceeded their production limits. As a result, discipline within the alliance has weakened: some countries restrict output while others effectively operate without limits. For the UAE, this means lost revenue without real influence over the market.

The conflict has also been fueled by a strategic divide with Saudi Arabia. Riyadh focuses on supporting prices by cutting production, even at the cost of losing market share. The UAE, by contrast, prioritizes increasing output and capturing market share, especially as production rises in the U.S. and other non-OPEC countries.

The final trigger was geopolitics. The war in Iran and the blockade of the Strait of Hormuz have severely disrupted exports from the region. Under these conditions, quotas lost their practical meaning, and the UAE chose to exit at a moment that minimizes short-term risks while giving it more flexibility once the situation stabilizes.

Why oil prices are not falling

So how did the market react? Almost not at all. According to Reuters, oil prices only saw a slight correction after the announcement: Brent remains around $110 per barrel following a recent rally. Prices have not dropped due to supply disruptions, as the Strait of Hormuz — through which about 20% of global oil flows — remains blocked.

In reality, the market is facing a shortage, so even a potential increase in UAE production cannot quickly affect supply. Moreover, inventories continue to decline: according to API data, U.S. crude stockpiles fell by about 1.8 million barrels over the past week. This supports prices and offsets the impact of the UAE’s exit.

The main effects will come later. Once flows through the Strait of Hormuz resume, the UAE will be able to ramp up production without restrictions. That would increase supply and put downward pressure on prices. Analysts already describe this as a bearish factor over the coming years.

Another risk is the weakening of OPEC itself. If other countries follow the UAE’s lead, it will become harder for the cartel to coordinate production. In that case, the market could become more volatile, with periods of shortage followed by oversupply and sharper price swings.

What it means for consumers and producers

The UAE’s exit did not trigger an immediate price drop because the market is currently constrained by supply shortages. But once flows normalize, the situation may change: if the UAE begins to fully utilize its capacity, additional volumes will enter the market. For consumers, this could mean lower fuel prices, while for producers it would mean tougher competition.

For OPEC, this is a warning sign. The organization has long relied on discipline among its members, with countries agreeing to limit production to influence prices. Now one of its key producers is leaving that system. If others follow, OPEC may keep its name, but its ability to control the market could weaken significantly.

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