The United Arab Emirates they left him OPECdealing a major blow to the organization amid the global energy shock caused by the war with Iran.
The sudden departure of the UAE, a longtime member of OPEC, could create turmoil and weaken the organization, which until now has tried to maintain a united front. despite internal disagreements over geopolitical issues and production quotas.
The Gulf countries that participate in OPEC are already facing difficulties in transporting oil through the Strait of Hormuz due to Iranian threats and attacks on ships.
The UAE joined OPEC in 1967 through the Emirate of Abu Dhabi and remained a member after the federation was founded in 1971. The withdrawal takes effect on Friday 1 May.
However, the UAE’s exit from OPEC and the OPEC+ alliance considered a major “victory” for Trump, who has accused the agency of “exploiting the rest of the world” through high oil prices.
The price of Brent has reached as high as $119.50 a barrel since the start of the war with Iran, while on Tuesday it rose 3.4% to $111.67.
Analysts’ reactions
The UAE’s decision, which deals a heavy blow to oil-producing countries, is the focus of analysts.
⇒ Gary Ross, CEO of Black Gold Investors and veteran OPEC analyst
“The UAE has been ignoring quotas for years and has been following a policy of near maximum production. Saudi Arabia was effectively OPEC as it was the only country with excess production capacity. It is positive that Russia is also participating, somewhat limiting the growth of the supply.”
⇒ Michael Brown, senior strategist at Pepperstone
“This is undoubtedly a significant event for the global energy market, however the immediate impact will likely be limited. As the US-Iran conflict continues and the Strait of Hormuz remains closed, the key problem for the oil market is not production but transportation to where it is needed. Today’s announcement does not change this reality. However, the UAE’s pre-Iran war target of producing 5 million barrels per day by 2027 may now be more achievable, which could help prices normalize more quickly after the end of the Middle East conflict.”
⇒ Ole Hansen, Saxo Bank
“In the short term, the market may absorb additional barrels from the UAE, given low inventories and the need to replenish them. In the long term, however, the withdrawal raises a strategic question: if other producers prioritize market share, rather than quota discipline, OPEC’s ability to regulate the market will be called into question.
⇒ Jan von Gehrich, Chief Market Analyst, Nordea
“The UAE is looking to increase production, so this development will likely put downward pressure on oil prices. After the end of the conflict with Iran, OPEC will not be able to control prices as in the past.”
⇒ Monica Malik, Chief Economist of ADCB
“The development paves the way for an increase in the UAE’s market share once the geopolitical situation stabilises. Withdrawal may be positive for consumers and the global economy as a whole.”
⇒ Jorge Leon, Rystad analyst
“Along with Saudi Arabia, the UAE is one of the few countries with substantial excess capacity — a key price influencing mechanism. In the short term the effects may be limited due to the disruptions in the Strait of Hormuz, but in the long term OPEC is structurally weakened. Outside the organization, the UAE will have the incentive and ability to increase production, challenging Saudi Arabia’s role as a central stabilizer and possibly leading to a more volatile market.”
⇒ Ajay Parmar, ICIS
“The UAE has long disagreed with OPEC policy. Unsurprisingly, it will have significant long-term consequences. It also shows a weakening of the traditionally strong alliance with Saudi Arabia.”
⇒ Sergey Vakulenko, Carnegie Russia Eurasia Center
“The UAE was planning a production increase of up to 30%, difficult within OPEC+ constraints. The timing is probably the least damaging: prices are high and there are real shortages due to Hormuz. After the opening of the Straits, demand will remain high due to replenishment of stocks. Without the UAE, OPEC will be much weaker. Other major producers, such as Iran and Iraq, do not have significant excess capacity — this has mainly been the prerogative of the UAE and Saudi Arabia.”
The reasons for leaving
Tuesday’s surprise announcement comes after weeks in which the UAE has been the target of missile and drone attacks by OPEC member Iran. Tehran’s attacks on shipping in the Strait of Hormuz have severely limited the UAE’s ability to export oil, threatening the basis of their economy.
The UAE has played an influential role in OPEC decisions for nearly six decades. In February it was the agency’s third-largest oil producerafter Saudi Arabia and Iraq. The Gulf state joined OPEC in 1967, seven years after its founding.
The UAE’s energy ministry said in a written statement that it had concluded that the exit served the national interest, following a comprehensive review of the country’s oil production policy and capacity. Energy Minister Suhail Al Mazroui told CNBC that the decision was taken at a time that will cause the least possible disturbance to the remaining producers.
“Our withdrawal at this time is appropriate because it will have minimal impact on prices and on our OPEC and OPEC+ partners,” he said. He added that the UAE they seek to reach a production capacity of 5 million barrels per day by 2027 and they want more flexibility to achieve this goal. He also stressed that the decision was not related to multi-year production cuts led by Saudi Arabia.
