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Informist, Thursday, Apr. 30, 2026

By Ashutosh Pati

MUMBAI – The decision of the United Arab Emirates to leave the Organization of the Petroleum Exporting Countries shows how fractured relationships in the grouping are and how some of the member nations resent the production quotas it sets. Analysts say this is a "well-timed" move by the Persian Gulf country as global oil markets are reeling from a record loss of supply, limiting the impact of the exit on crude oil prices.

The UAE will leave OPEC Friday. It said the decision reflects the country's long-term strategic plans and evolving energy profile, including higher crude oil production. "During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all," it said. "However, the time has come to focus our efforts on what our national interest dictates and our commitment to our investors, customers, partners, and global energy markets."

"This is a significant move and will be a big blow to OPEC," Warren Patterson, head of commodities strategy at ING, said in a report. "It's the highest-profile exit from OPEC in recent years."

In the short term, the development is expected to have little impact on the oil market, evident from the fact that prices barely reacted. The sole focus of market participants right now is the resolution of the war in West Asia and resumption of shipping through the Strait of Hormuz, a critical choke-point through which around a fifth of global energy supplies flow.

Analysts said the timing of the UAE's exit was "planned well", coming as it does during a period of significant supply disruption, because of which the move has limited impact on the market. "Had this been announced any other time, we would likely have seen more downward pressure on oil prices," Patterson said.

The market's focus is expected to remain on physical disruption risks and export logistics rather than institutional signalling, analysts at ANZ Research said in a report. "The Strait of Hormuz disruption and associated security/shipping constraints are currently the binding variables for barrels reaching markets, and that reduces the immediate relevance of quotas," they said.

Brent crude oil prices may appreciate to $116-$120 per barrel in the coming sessions, putting extra pressure on the US and Iran to come to the negotiating table, Jigar Trivedi, senior research analyst – currencies and commodities, at IndusInd Securities Ltd., said.

"A move above $120 per barrel in the short term would require a strong catalyst--such as a major geopolitical disruption, unexpected production cuts, or severe supply outages," Ajay Kedia, director of Kedia Stocks & Commodities Research Pvt. Ltd., said. On its own, the UAE's exit would not necessarily trigger such a spike unless it leads to broader disunity or aggressive output changes, Kedia added.

In the medium to long term, the UAE's exit could lead to additional supply from the country, which has longed to increase its output to the maximum capacity. The UAE has a target of 5 million barrels per day of crude oil output by 2027. "However, before this can be tapped, there must be a resolution in the Persian Gulf that allows for uninhibited energy flows through the Strait of Hormuz once again," Patterson said.

The country's oil output before the war broke out in late February was around 3.6 million barrels per day, close to the effective operating levels under OPEC's guidelines. While the UAE's state-owned oil company, Abu Dhabi National Oil Company, has been pushing towards producing 5 million barrels per day by 2027, "that target is hard to square with quotas built around someone else's view of the market", Trivedi said.

Analysts at ANZ expect additional supply of around 1 million barrels per day from the UAE without any constraints from OPEC. However, this amount is "unlikely to translate into step-change in global supply, despite perceptions of substantial unused capacity", they said. "This reflects a combination of operational realities, gradual rampup profiles, domestic demand growth, and the fact that some capacity is not immediately marketable."

Moreover, they expect somewhat "semi-permanent capacity loss" across producers in the Persian Gulf due to the conflict. Even after the hostilities subside, extended production shut-ins, damage to surface infrastructure, and deferred maintenance and accelerated reservoir decline risk will reduce effective output ceilings.

"Historically, not all shutin production returns cleanly or quickly, particularly where wells have been offline for extended periods or where export infrastructure has been damaged. As a result, the net increase in available Persian Gulf capacity, postconflict, may be materially smaller than preconflict nameplate estimates imply," the ANZ analysts said.

Meanwhile, ING's Patterson said the UAE's decision would certainly be welcomed by US President Donald Trump, as it erodes OPEC's influence in the global petroleum market. Trump had last year asked the group to lower oil prices and increase production. OPEC and Trump often clashed in his first term when he demanded that OPEC raise crude oil output to compensate for the fall in Iranian supply on account of US sanctions.

"The other factor to monitor is whether the UAE's exit will lead to further fracturing amongst the remaining OPEC members," Patterson said. The ANZ analysts said the exit increases the likelihood that oil markets will be less anchored and more reactive in the coming months, reinforcing a structurally higher volatility outlook.  End

US$1 = INR 94.84

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Rajeev Pai

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