How the UAE’s departure from OPEC will affect global oil markets
The United Arab Emirates announced Tuesday it will leave OPEC later this week, weakening the cartel’s influence over global oil supply and prices.
The UAE, long one of OPEC’s largest oil producers, said it will “continue to act responsibly, bringing additional production to market in a gradual and measured manner, aligned with demand and market conditions.”
It noted that due to recent disruptions in the Persian Gulf and the Strait of Hormuz, trends point to increasing demand for oil in the long term.
“A stable global energy system depends on flexible, reliable, and affordable supply,” the UAE wrote in a statement online. “The UAE has invested to meet evolving demand efficiently and responsibly, prioritising stability, affordability, and sustainability.
What does this mean for oil production and prices?
OPEC coordinates petroleum policies among its member nations, which will number 11 after the UAE’s departure. The UAE had opposed OPEC’s decisions in recent years to cut production to boost prices, an apparent factor in its decision to leave the cartel.
With its departure from OPEC, the UAE will have more flexibility over its oil industry and has pledged to “gradually” increase production.
Exactly how that will affect the global oil market in the short term is unclear, especially as the Strait of Hormuz remains effectively closed amid the war between the U.S. and Iran.
“Though the U.A.E. have pledged to ‘gradually’ increase production after their departure, it goes without saying that actually doing so at present is somewhere between difficult, and impossible,” Michael Brown, a senior research strategist at Pepperstone, told MarketWatch.
UAE Energy Minister Suhail Mohamed al-Mazrouei told Reuters the departure likely won’t have a major effect on markets, due to the ongoing situation in the Strait.
OPEC’s control over the market
The UAE’s departure does, however, further weaken OPEC’s control over the global market.
Ashley Kelty, an energy analyst at Panmure Liberum, said OPEC’s influence has waned as the U.S. began meeting most of its oil demand domestically and Venezuela, an OPEC member, became a “de facto U.S. puppet.”
“The U.S. is now the global swing producer,” Kelty told MarketWatch. “U.A.E. will benefit from being able to align itself closer with the U.S. now.”
The UAE is the fourth nation to drop out of OPEC in recent years. Angola ended its 16-year membership in January 2024, Ecuador left in 2020 and Qatar departed the year before that.
How the UAE’s departure impacts the US
While the UAE’s departure may not have an immediate and drastic impact on global oil prices, it’s a win for the Trump administration.
In a 2018 speech to the United Nations General Assembly, President Donald Trump accused OPEC of “ripping off the rest of the world” by inflating oil prices.
He has even linked U.S. military support for Gulf countries with oil prices, saying U.S. troops continue to defend OPEC members even as they “exploit this by imposing high oil prices.”
Ella Rae Greene, Editor In Chief
