Eurasia Press & News
Consensus remains that oil market management is needed to avoid severe boom-bust cycles
The UAE’s decision this week to leave the Organization of the Petroleum Exporting Countries came as a surprise to many, although the move had been years in the making. What is different now is the context in which it lands.
Since 2016, UAE state oil company Adnoc has transformed from a sleepy giant into a pragmatic, modern, multi-energy enterprise. With the global energy transition gathering pace, the company has pushed ahead with plans to expand its output capacity to 5 million barrels per day by 2027, from current levels around 4.8 million bpd. The simplified goal is to monetise the crude before it is too late.
This strategy is precisely where tensions between the UAE and the 11 other members of Opec and its enlarged version, Opec+, began to surface.
In 2021 the UAE had a very public spat with the group over production quotas, gaining resolution at the time with a revision to baseline capacity. Still, the change was not seen as enough.
Since the start of the US-Israeli war with Iran, the UAE has been on the receiving end of the heaviest number of attacks, prompting the Emirati leadership to review all its relationships and memberships in global institutions.
In that context, Opec membership is no longer just an economic question. It has become part of a broader strategic recalibration. Institutions that no longer serve national interests are likely to be reconsidered or discarded.
The UAE’s exit from Opec, therefore, carries both technical and political weight. It reflects a more assertive, security-driven approach to global positioning.
The decision was officially framed as seeking flexibility to produce more oil without quota constraints once the Strait of Hormuz – the narrow waterway through which a fifth of the world’s oil passes – fully reopens. The timing of the exit, while the strait remains restricted, also meant oil prices reacted little.
But does that mean the UAE will open the taps once the war ends? Such action is unlikely.
It will be a gradual process to avoid triggering a price war with Saudi Arabia, which has over 12 million bpd of sustainable oil production capacity. Pre-war, UAE production was around 3.3 million bpd. If the strait situation normalises, output could rise to around 4 million bpd over a few months.
The political dynamic is significant. After all, a decision to leave Opec is not made merely at ministry level. It is one taken by the country’s leadership, with membership long seen as a bond between the UAE and Saudi Arabia.
This is not the first time the UAE’s and the kingdom’s views failed to align. The two countries have clashed over Yemen and Sudan military intervention. Moreover, competition has generally sharpened between the UAE and Saudi Arabia in recent years.
The UAE, disappointed by Arab states over their muted support during the war, has vowed to double down on its relationship with the US. President Donald Trump and the West have long seen Opec as an outdated organisation benefiting Iran and Russia.
I do not believe the US asked the UAE to leave Opec, but Trump praised the move as “great”.
Another factor the UAE may have weighed is Iran’s continued membership of Opec. While the organisation has historically held together even when members were in direct conflict, this moment is different.
Protecting collective interests
Over the years, amid market and political challenges, Opec has not only survived but evolved. In 2016 the group created Opec+, bringing in Russia and other non-Opec producers to expand its influence. Now the challenge will be to prevent further member states leaving, following the UAE’s lead.
It is not the first time a Gulf state has left the alliance. In 2019, Qatar quit Opec. The difference is that Qatar is a much smaller oil producer; therefore, questions about the group’s cohesion at the time were muted.
Although the UAE announcement hit hard and prompted some members to question their presence in the group, consensus remains that market management is necessary to avoid severe boom-bust cycles that undermine the investment needed to maintain oil production.
Under Trump’s current term and leadership style, there has been a general trend towards moving away from institutions. His disappointment that Nato refrained from joining his war led him to threaten to leave the international body.
But the reality is that, despite the perception that institutions sometimes fail to deliver, they are there to protect the collective national interests of their members. They also create protective barriers through checks and balances.
Breaking away is not always the right answer.
