What does the UAE's withdrawal from OPEC mean for oil prices?

The UAE announced its withdrawal from OPEC, yet the oil market was almost unmoved—this paradox alone illustrates the predicament of the 66-year-old oil cartel today. A historic Middle Eastern conflict is reshaping the global energy landscape, and the UAE's departure merely causes OPEC's already shaky authority to lose another pillar.

On April 28, the UAE announced it would officially leave OPEC and the OPEC+ alliance on May 1, instantly making the cartel lose its third largest oil producer.

After the news broke, Brent crude continued a seven-day rise, with nearly all market attention focused on the U.S.-Iran war and changes in the situation at the Strait of Hormuz—there were reports that Trump was dissatisfied with Iran’s ceasefire plan, pushing June Brent crude up 2.8% to $111.26 per barrel, and WTI crude up 3.7% to $99.93 per barrel.

UBS assessed in its latest report that, with the Strait of Hormuz currently closed, the UAE cannot temporarily increase exports, so its withdrawal won’t substantially impact short-term oil prices; but in the medium term, as the UAE gains autonomy over production, oil prices face downside pressure.

"This is the beginning of the end for OPEC," said MST Financial energy analyst Saul Kavonic, "Saudi Arabia will find it difficult to unite the remaining members, and others including Venezuela may follow the UAE’s lead."

The Oil Market Watches Coldly: Hormuz Is the Real Main Actor Now

The ripple from the UAE’s withdrawal barely showed in oil prices, for understandable reasons. The Strait of Hormuz is a global chokepoint for oil trade, with nearly one-fifth of the world’s oil passing through it, and Iran holds de facto control over it. Over half of OPEC's output comes from Saudi Arabia, Iraq, and Kuwait, and Tehran can cut off these export routes at any time.

Joel Hancock, senior commodities analyst at Natixis Bank, pointed out: "This completely dilutes OPEC’s market influence, putting Iran in control of the vast majority of OPEC exports. In the current situation, OPEC is effectively becoming a tool of Iran's foreign policy."

This backdrop has also reshaped the market’s assessment of pricing power. Saul Kavonic said, "The U.S.-Iran war has shown that U.S. influence over global oil flows is at least equal to, if not greater than, OPEC."

Raymond James investment strategy analyst Pavel Molchanov noted, "Weakening OPEC means lower oil prices over the long term," but he also warned that persistently high prices are a double-edged sword for oil producers—once it greatly accelerates global adoption of electric vehicles, it will fundamentally suppress demand for oil, "which does no good for any oil-producing country."

Short-term Limited, Medium-term Bearish: Capacity Expansion Roadmap

The most direct impact of the UAE’s OPEC exit will be evident in its production trajectory.

According to UBS’s report, before the conflict, UAE crude output was about 3.6 million barrels per day, while actual capacity was about 4.5 million barrels per day; ADNOC (Abu Dhabi National Oil Company) claimed capacity had reached 4.85 million barrels per day and plans to increase this to 5 million barrels per day by 2027.

But capacity release faces the same near-term obstacle—the closed Strait of Hormuz means the UAE cannot increase exports, and strategic value of production expansion will be fully realized only after the strait reopens.

UBS believes this poses a medium term downside risk to oil prices. It currently expects the UAE's oil GDP to slightly decline in 2026, rebounding by about 6% in 2027, assuming crude output recovers to about 3.65 million barrels per day. If an extreme situation materializes—UAE quickly boosts output to 5 million barrels per day before the end of 2027—theoretically oil GDP may leap over 20%, but UBS sees this scenario as unlikely.

From a market structure perspective, the UAE previously held about 25% of OPEC’s spare capacity—second only to Saudi Arabia. Rystad Energy’s head of geopolitical analysis and former OPEC employee, Jorge León, noted the UAE’s departure "removes one of OPEC’s core pillars for maintaining market management," meaning OPEC’s ammunition for handling supply shocks coming will be heavily restricted.

Saudi-UAE Rift: Long-standing Quota Disputes

Conflicts between the UAE and OPEC have a long history, deeply rooted long before this U.S.-Iran conflict.

Over the past decade, the UAE has continually raised its crude capacity targets—from 3 million barrels per day to 5 million barrels per day—and sought higher production quotas, with Saudi Arabia initially fiercely resisting, worried that its neighbor’s rise would dilute Saudi dominance over OPEC pricing mechanisms.

In 2021, the UAE threatened to quit, eventually winning a higher quota, but was repeatedly accused of exceeding it. Marex analyst Edward Meir noted the UAE and Saudi Arabia have been "in opposition" for a long time; this U.S.-Iran war brought the conflict to a breaking point—the UAE urgently needs to rebuild its damaged economy and no longer wishes to be bound by quotas.

Saudi Arabia’s stance is low profile. Former senior Saudi oil advisor Mohammad al-Sabban wrote on X platform, "The UAE’s withdrawal won’t greatly impact the global oil market because it has always overproduced. It’s always been the 'naughty child'." His remark implies that the UAE’s exit may make OPEC internal decision-making smoother—allowing Saudi Arabia to concentrate more power. But it raises a new question: Is Saudi Arabia willing to bear the full cost of production cuts alone?

OPEC’s Fate: End or Adapt?

The UAE is not the first to leave OPEC—in recent years, Qatar, Ecuador, Indonesia, and Angola have left.

But Raad Alkadiri, senior fellow at the Center for Strategic and International Studies (CSIS) and veteran OPEC observer, believes the timing of this exit is "remarkable," "driven more by political motives than oil market logic," reflecting deeper regional geopolitical rifts in the Middle East.

He says the UAE’s exit is unlikely to be a "fatal blow" to OPEC unless there is a chain of withdrawals. If Venezuela, Iraq, or Iran decides to leave, OPEC will face a real collapse.

These countries "may now have more bargaining chips in OPEC decisions than before." Even with the UAE gone, OPEC+—including non-OPEC oil producers—still accounts for about 40% of global oil output. Alkadiri stresses, "If Saudi Arabia can keep this more fragile alliance together, the UAE’s departure can be absorbed."

Rapidan Energy Group founder Bob McNally believes the UAE may regret its move. He said, "Without effective market management, oil prices may become highly volatile, especially once there is oversupply." "When the world next faces oversupply, major oil producers will again come under pressure to cooperate. The question is when will that day come—it could be soon, as in the 2008 Great Recession, or it could be years away."

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