The United Arab Emirates (UAE), which ranks third in oil production in OPEC, is leaving the alliance. This decision is explained by the need to increase production, which is hampered by OPEC quotas, and, possibly, is a consequence of agreements with the United States. The demarche could push other OPEC members to leave the association and cause a period of low oil prices, which creates risks for Russia, experts warn.
The UAE, after almost 60 years of membership in OPEC, announced its withdrawal from the organization on May 1. A similar decision was made regarding OPEC+, organized in 2016. The state pointed to the sacrifices made during participation in the organization and noted that “the time has come to focus our efforts on what national interests and obligations to investors, clients, and partners dictate.”
State news agency WAM said in a statement that the UAE will continue to act responsibly, gradually and in a measured manner, increasing market production in accordance with demand and market conditions. Energy Minister Suheil al-Mazrouei explained that now is a good time to make this decision, as it will not have a significant impact on the market and the price of oil due to the closed Strait of Hormuz.
In OPEC, the UAE ranks third after Saudi Arabia and Iraq. Their share in the coalition’s total production exceeds 11%.
In March, the UAE cut production by almost 90% by February, to 1.82 million barrels per day (b/d). Production from Russia, which is not a member of OPEC but is participating in the OPEC+ deal, amounted to 9.16 million bpd.
Currently, participation in alliances significantly limits the UAE’s production. The country’s oil production capacity exceeds 4.8 million bpd; by 2027, the UAE planned to expand it to 5 million bpd. At the same time, the OPEC quota in April and May was about 3.4 million bpd.
The UAE has repeatedly tried to challenge the permitted production level. The strongest conflicts during the meetings arose with the leader of the coalition, Saudi Arabia. Due to disagreements, UAE representatives twice announced a possible withdrawal from OPEC and OPEC+ in 2020 and 2023, but then did not take radical steps. In recent years, two countries have left the organization – Angola in 2023 and Qatar in 2019, but their production volumes are not comparable to the level of the UAE.
Deputy head of the National Energy Security Fund Alexey Grivach calls the UAE’s decision a demarche against OPEC partners.
He believes that this step may be related to negotiations with the United States on financial support in case the operation against Iran drags on and causes a deeper crisis. Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, also admits that the UAE’s exit may be one of the conditions for assistance from the United States. For Washington, he said, it is extremely important to reduce oil prices and, as a result, the cost of fuel on the American market, which will give President Donald Trump some respite and the opportunity to continue the conflict with Iran, Mr. Yushkov believes.
Alexey Grivach says that now the UAE’s exit from OPEC will have virtually no impact on the global market due to a stop in supplies through the Strait of Hormuz and a reduction in production. But after the opening of shipping, the country will actively begin to increase production, which will inevitably put pressure on quotes and cause prices to collapse, notes Mr. Grivach. The UAE’s exit from OPEC will weaken the organization’s influence on the global market and potentially lead to an increase in the supply of Dubai grade oil, according to CCI analysts.
The UAE’s withdrawal from the alliance may also serve as an example and OPEC will lose its stabilizing role, says Mr. Grivach. Kasatkin Consulting partner Dmitry Kasatkin agrees that the threat of other countries leaving is always discussed when a precedent appears, especially such a striking one. In his opinion, candidates for exit are Iraq and Kazakhstan, which have the same contradictions between domestic strategy and OPEC policy, as well as Venezuela and Iran due to their relationship with the United States. Reuters, citing Iraqi officials, reported that the country does not plan to leave OPEC and OPEC+.
But, according to Igor Yushkov, other countries are unlikely to announce their decision to leave OPEC now, even if it is accepted. Many participants’ production and exports are limited by the conflict in the Middle East, so it is important for them to maintain high oil prices, he explains. After the liberation of the Strait of Hormuz, the issue of increasing quotas by other producers will certainly arise, Mr. Yushkov believes.
Mr. Kasatkin believes that the departure of the UAE as a whole will make the organization weaker, as it will lose control of 3-5% of global production. Saudi Arabia will continue to be the core of the coalition, but everything will depend on what it offers current and potential members now. Riyadh alone will not be able to influence global markets, the expert believes.
For Russia, according to Dmitry Kasatkin, the situation will be negative if large producing countries begin to act solely in their own interests, “since first we will see a period of low prices, and then, due to a lack of coordination, high volatility, turning into shocks for the market.” Freedom Finance Global analysts believe that the risks for Russia are not so much the UAE’s exit from OPEC+, but rather the possible collapse of the alliance and a long period of declining oil prices after the end of the Iranian conflict. Igor Yushkov notes that Russia will not be able to significantly increase supply volumes, especially in the short term: Russia produces less than its OPEC+ quota, and export terminals are under constant attack.
