UAE Announces Withdrawal from OPEC Effective May 1, Citing Production Constraints and Strategic Priorities

The UAE announced via its state-run WAM news agency that it would withdraw from both OPEC and the OPEC+ group, effective May 1. In its statement, the country said the decision "reflects the UAE's long-term strategic and economic vision and evolving energy profile, including accelerated investment in domestic energy production," and that it would bring "additional production to market in a gradual and measured manner, aligned with demand and market conditions."

The UAE's frustration with OPEC production quotas had been building for years, according to AP. The country had been producing around 3.4 million barrels of crude oil per day before the U.S.-Israeli war with Iran began on February 28, while analysts say it has capacity to produce roughly 5 million barrels per day. Capital Economics, cited by AP, wrote that "the bigger picture is that the UAE has been itching to pump more oil." NPR reported that the UAE had long expressed frustration with the quota system governing OPEC members.

The withdrawal removes a significant producer from OPEC's ranks. Jorge Leon, head of geopolitical analysis at Rystad Energy, told AP that the UAE is one of OPEC's few members with the ability to quickly increase production. "A structurally weaker OPEC, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilize prices," he said. AP also noted that OPEC's market power had already been waning as U.S. crude production surpassed 13 million barrels per day, compared to Saudi Arabia's roughly 10 million before the Iran war.

Despite the formal announcement, the immediate market impact of the withdrawal may be limited. The ongoing war in Iran has closed the Strait of Hormuz, through which approximately one-fifth of global oil supplies — including much of the UAE's — is transported. Brent crude traded above $111 a barrel on Tuesday, more than 50% above its prewar price, according to AP.

Relations between the UAE and Saudi Arabia, OPEC's largest producer, have grown increasingly strained. AP reported that the two countries have competed over economic and regional political matters, with Saudi broadcasters pulling back from Dubai in recent months. A December incident in which Saudi Arabia bombed what it described as a weapons shipment bound for UAE-backed Yemeni separatists further strained the relationship. Karen Young of Columbia University's Center on Global Energy Policy told AP that "this exit of OPEC fits into the UAE need for flexibility with key energy consumers as well — including a future relationship with China and a more competitive relationship with Saudi Arabia." Nevertheless, al-Mazrouei told CNBC that the decision did not stem from any dispute with Saudi Arabia, stating: "We've been working together for years and years. We have the highest respect for the Saudis for leading OPEC."

AP also noted that Qatar withdrew from OPEC in 2019, and that the UAE sent its foreign minister — rather than its ruler — to a Gulf Arab leaders' meeting in Jeddah on Tuesday, hosted by Saudi Crown Prince Mohammed bin Salman.