The United Arab Emirates’ decision to leave the Organization of the Petroleum Exporting Countries (OPEC) will sharply reduce the 65-year-old group’s influence on the oil market, opening the door to a full-scale price war as Gulf producers rush to regain market share after the end of the war with Iran, writes Ron Busso for "Reuters".
The surprise move comes at a time of unprecedented turmoil in energy markets - for two months, oil and gas exports from the Gulf have remained largely paralyzed by the closure of the Strait of Hormuz, which has limited OPEC's traditional ability to manage the oil market during a crisis.
UAE Energy Minister Suhail Mohammed al-Mazrouei explained that the decision to leave the Organization of the Petroleum Exporting Countries was driven by the need to meet growing global energy demand.
That may be true, but the freedom to increase production without restrictions was probably an equally strong - if less altruistic - motive. According to data from the International Energy Agency in February this year The UAE is OPEC’s fourth-largest producer after Saudi Arabia, Iran and Iraq, accounting for about 12% of total output, according to the International Energy Agency.
The UAE has capacity of about 4.85 million barrels per day (bpd) and is aiming to increase that to 5 million bpd by 2027 — ambitions that were not compatible with OPEC’s ongoing production curbs.
Speculation that the UAE would leave OPEC had been rife for years. Like other Gulf producers, the UAE has vast oil reserves and enjoys some of the lowest production costs in the world, meaning it is in a strong position to generate profits even during prolonged periods of low prices.
This advantage has made Saudi Arabia’s production curbs increasingly difficult to justify from Abu Dhabi’s perspective. While the restrictions support prices, they also limit revenues and can cede market share to higher-cost competitors.
In addition, there is a limited window of opportunity for hydrocarbon monetization. Oil consumption is expected to peak in the coming decades and then begin to decline as economies shift to renewable energy sources. This gives producers a greater incentive to maximize output now rather than cut back in the interest of long-term price stability.
As Saudi Arabia has struggled to rein in overproduction in recent years, the UAE has frequently exceeded its quotas, making relations between Riyadh and Abu Dhabi increasingly strained.
The tensions between Saudi Arabia and the UAE have spilled over beyond oil, into conflicts in Yemen, Libya and Sudan. More recently, the two Gulf powers have differed in their public responses to Iran’s strikes.
The UAE’s dramatic move thus marks not only a watershed moment for OPEC, but also a potential turning point for power relations in the Gulf itself.
Riyadh’s de facto leadership of OPEC has long been a central pillar of its strategy to project international power and dominate the region. The departure of a key, long-standing OPEC member seriously weakens this already shaky alliance. It has been under repeated strain this year, first after the US ousted Venezuelan President Nicolas Maduro and then by the war with Iran itself.
OPEC, which currently has 12 members, including the UAE, has been trying for decades to regulate the oil market by jointly managing crude oil production. While the group controls roughly 80% of the world’s oil reserves, its share of global production has fallen from around 50% in the 1970s to roughly 30% today.
Conflicts in some member states are partly responsible, but the bigger change is the surge in non-OPEC supplies, particularly from the United States, Canada, and Brazil.
The OPEC+ alliance, formed in 2016 to include Russia, briefly regained some of that lost influence. Covering more than 40% of global production, it has proven an effective tool for managing supply disruptions and price volatility. But that coherence has depended largely on Saudi Arabia’s ability to impose discipline.
The UAE’s exit not only further erodes OPEC’s market share, but could also encourage other OPEC+ members to question the value of limiting production, weakening collective decision-making and raising the risk of further defections.
More importantly, since the end of the war with Iran, this new dynamic could mark the first blow in a fierce struggle for market share between the major producers – OPEC+, the UAE and the US – potentially triggering a sharp decline in oil prices and years of turbulence.
At first glance, the timing could hardly be worse. The Middle East is rocked by the war with Iran. The nearly hermetic closure of the Strait of Hormuz, now in its third month, has blocked more than 13 million barrels per day of oil production, roughly 13% of global supplies, as well as about a fifth of global flows of liquefied natural gas. The blockade has choked off vital revenues for the region and forced producers to halt production of nearly 10 million barrels per day.
In addition, Tehran has fired thousands of missiles and drones at neighboring OPEC members, causing severe economic damage and damaging energy facilities.
Looked at another way, Iran’s attack on the UAE, Saudi Arabia, Kuwait and Iraq – all OPEC members – would inevitably have accelerated this division, highlighting the fragility of the group’s unity. Shared membership is no guarantee of shared interests when national security and revenue are at stake.
In fact, Abu Dhabi has criticized other Arab states for not doing enough to protect it from Iranian attacks, highlighting the extent to which security concerns have influenced economic decision-making.
Perhaps most importantly, the turmoil has given the UAE a convenient moment to leave without having a major immediate impact on physical supplies or prices.
The UAE is not the first country to withdraw from OPEC. Qatar left in 2019, Ecuador in 2020, and Angola in 2024. But none of them left with the scale, spare capacity, and regional clout of Abu Dhabi.
This time is different. The loss of a producer with ambitions to rapidly expand production risks stripping OPEC of its remaining authority. Once the war with Iran subsides and barrels return to the market, the group may find itself less united than ever, suggesting that OPEC as we know it is gone.