UAE exits OPEC, signaling strategic shift in energy policy

In a bombshell announcement on Tuesday, the UAE said it has decided to exit OPEC and OPEC+ effective May 1, marking a significant shift in the country’s long-term energy strategy and its approach to global oil markets.

In an official statement carried by the UAE’s state news agency, the decision was framed as one that “reinforces” the country’s “commitment to a responsible, reliable, and forward-looking role in global energy markets.”

The idea of leaving the OPEC+ group is not new; it has been floated by the UAE over the years as the country expressed grievances over its assigned quota and the assessment of its spare capacity. While adjustments to its quota were made and accepted at the time, current regional dynamics have shifted the context. With supplies in the region being impacted by the ongoing war and restricted flows through the Strait of Hormuz, the timing of the UAE’s exit has had no immediate impact on the market but does raise questions about the overall cohesion of the OPEC+ group.

For the UAE, the decision to leave OPEC+ is not merely a technical one related to the energy ministry. It is a sovereign decision that required approval from the country’s leadership, in line with its evolving political and economic vision. The UAE has been a member of OPEC since 1967 and, over the years, diversified its economy away from oil compared to other countries in the region.

It remains unclear whether UAE officials shared their position with other Gulf states prior to the announcement. Since the start of the war, Emirati commentators have also flagged a perceived lack of support from Arab states when the UAE came under attack by Iran. This has, in turn, triggered a broader reassessment of the country’s relationships and memberships in groups that may no longer align with its wider strategy. In recent weeks officials in the UAE also said the country would double down on its relationship with the US to counter the threat from Iran. Notably, no statement was released by the OPEC secretariat following the UAE’s announcement.

In recent years, the UAE has increasingly prioritized flexibility in energy production and investment, particularly as it expands capacity and diversifies across oil, gas, and lower-carbon energy sources. The country's national oil company ADNOC has evolved, and its leadership was losing patience with production restraints. The country has upgraded its oil production capacity to nearly 5Mbd, expected to be available by 2027, and keeping that capacity idle has been a subject of significant debate.

From a market perspective, UAE officials argue that stepping outside OPEC’s quota system will allow the country to respond more dynamically to market conditions and customer needs. Currently, the UAE has a crude output capacity of around 4.85 Mbd, and going forward, production will be guided by market dynamics rather than coordinated quotas. Prior to recent war-related constraints, secondary estimates placed UAE production at approximately 3.3 Mbd. It's understood that the UAE may want to exceed that production cap, perhaps taking its output to over 4Mbd once the conflict ends and Hormuz flows are normalized.

‍

The move echoes a precedent set by Qatar, which exited OPEC in 2019 to focus more heavily on natural gas development. Like Qatar, the UAE appears to be recalibrating its role in global energy markets while maintaining its position as a major hydrocarbon producer. However, unlike Qatar, the UAE’s exit carries greater weight, given that it is the fourth-largest producer in the group and a member of the eight states implementing voluntary cuts.

The announcement has also triggered speculation about whether other members might follow suit and whether this could signal the eventual end of OPEC+. Kazakhstan, for instance, has struggled to maintain its quota over the past year. However, from a broader perspective, OPEC has survived several member exits over the years. With Saudi Arabia and Russia still willing to manage the market through this framework, the group’s core function is expected to remain intact.

Since the start of the war, the group has maintained a steady policy approach, continuing to gradually unwind production cuts while preserving the quota system. However, if flows through the Strait of Hormuz resume, it is likely that the group will prioritize returning supply to the market at a faster pace. The risk of a price war is also something some delegates within the OPEC+ group are concerned about.

In March, the group’s production dropped by around 9Mbd, according to our estimates, and is expected to fall further in April due to deeper cuts from Iran linked to the US blockade.

‍