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The United Arab Emirates (UAE) announced its decision to leave the Organisation of the Petroleum Exporting Countries (OPEC) on 1 May 2026, after being a member since 1967, as it looks to generate more revenue and exercise greater autonomy.
The Middle Eastern nation currently produces around 3 million barrels per day, accounting for about 3% ofglobal oil supply, according to reports. The plan is to increase production capacity to 5 million barrels per day by 2027.
OPEC's production quotas were intended to stabilise prices. Member countries typically agree to restrict production to maintain price stability, but this also limits the amount each country can sell. The UAE believes it can generate more revenue by increasing production levels, even if prices decline.
OPEC is anything but a cohesive group, with the goals of its members often aligning around immediate opportunities rather than a long-term strategy. In this light, the group's unity in recent years has been remarkable, particularly considering the apparent divisions.
The UAE's decision to leave OPEC is viewed as both surprising and expected, resembling a departure from the primary group at a crucial moment, as noted by Norbert Rücker, Head of Economics and Next Generation Research at Julius Baer.
For many years, the UAE has been implementing a long-term strategy that reflects its understanding of the structural changes in the energy market and other sectors.
Rücker believes this strategy encompasses significant investments, both past and present, in oil and natural gas extraction, petrochemical manufacturing, liquefied natural gas exports, and the development of pipeline and rail infrastructure. Additionally, the wider economic diversification beyond the energy sector has played a crucial role in elevating the country to its current status. With the withdrawal from OPEC, Rücker stated that this allows for increased flexibility and autonomy.
Naturally, the oil cartel's future is under examination. Although leaving the organisation slightly diminishes its influence in theory, Saudi Arabia, which has been the de facto leader and primary policy executor in recent years, not only set the course but also consistently managed the significant reductions in production.
The history of petro-nations is mixed. While supply cuts helped stabilise prices during demand disruptions like those seen in 2020 or supported prices during periods of tightening in 2021, their effectiveness is usually short-lived and carries the risk of losing market share.
This has been particularly noticeable since 2022, especially with the rise of US shale oil and deepwater oil from South America, as highlighted in a report by Julius Baer.
According to a report by Tata Mutual Fund, the OPEC production data for 2024 highlights the continued dominance of Middle Eastern producers, with Saudi Arabia leading by a wide margin at 8.96 million barrels per day. Iraq follows with 3.86 million bpd, while Iran produces 3.26 million bpd.
The United Arab Emirates ranks fourth among the group's producers, contributing 2.92 million barrels per day, underscoring its significant role in global oil supply. Other key contributors include Kuwait at 2.41 million bpd and Nigeria at 1.35 million bpd, followed by Libya and Venezuela. Smaller producers such as Algeria, Congo, Gabon, and Equatorial Guinea contribute comparatively lower volumes, reflecting a wide production gap within the bloc.
According to Rücker, OPEC's primary concern isn't the UAE's departure but rather the significant changes in the oil market as a whole. In addition to US shale oil and deepwater oil from South America, the energy transition, the rise of electric cars and trucks, and the move towards natural gas-based petrochemical feedstocks contribute to a peak in oil demand. In a market characterised by stagnation and impending decline, competition tends to intensify. These challenges are best addressed without political constraints.
“The UAE’s exit from OPEC matches our longer-term view on the oil market, where ample supplies and increased competition anchor prices in the high USD 60s, a setting that emerged last year, and a setting that is very likely to return past today’s geopolitical turmoil. The impact of the exit on regional politics goes beyond our expertise, but it comes at a time of greater realignment of relationships in the region and could advance the solution-finding within the ongoing conflict,” said Rücker.
Rücker holds a neutral view on oil prices with a ±20% range, noting that Brent is currently around $111.5 per barrel. He expects prices to ease over time, with targets of $75 in the next three months and $60 over a 12-month horizon. Rücker highlighted that upside risks stem from a potential escalation of tensions involving Iran, including infrastructure damage and disruptions to oil trade flows. On the downside, a swift de-escalation of the conflict or a shift in overall market sentiment could put pressure on prices.
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