The UAE’s exit from OPEC is momentous, and undoubtedly the biggest schism in the organisation since it was founded in 1960. The UAE, a member since 1967, has risen by developing its vast resources to become OPEC’s second-largest producer by liquids capacity today. Our Macro Oils and Upstream experts, Alan Gelder, Douglas Thyne, Hazel Seftor, Alexandre Araman and Dalia Salem analyse why it’s happened and the implications for the oil market.

Political tensions have been ramping up for many years

Underlying the decision to leave OPEC are political tensions between Saudi Arabia and the UAE that have been steadily building in recent years. OPEC policy and the constraint imposed by quotas versus the UAE’s growing production capacity have been one factor. The UAE is just one of the countries irked by the Saudi-Russia formulated decisions driving OPEC+ policy, according to OPEC+ sources.

The two countries are also on divergent paths in regional politics, with the UAE on the opposite side to Saudi Arabia in several regional disputes. There have also been well-documented differences in their approach to efforts to secure a diplomatic resolution of the current Middle Eastern conflict. Separately, Saudi Arabia has pushed for its capital, Riyadh, to vie with neighbouring UAE metropolises, Abu Dhabi and Dubai, for leadership in the region.

The UAE is in a unique economic position to walk away from OPEC. It has a much larger share of unused productive capacity compared with other members, that without the current restrictions it can put to use. Furthermore, the UAE has much lower fiscal oil price breakevens relative to its peers, leaving its economy relatively resilient and better able to sustain a potential period of low prices.

Closure of the Strait of Hormuz smooths the exit

The UAE’s decision to exit OPEC comes at a time when its near-term production outlook is constrained by the ongoing closure of the Strait of Hormuz, limiting any immediate market impact. With close to 2 million b/d of offshore production currently shut in, the country’s ability to increase supply in 2026 is restricted regardless of policy changes. Even once transit through Hormuz resumes, a return to pre-conflict production levels may take up to six months. As a result, the UAE’s exit is more likely to influence supply dynamics in 2027 and beyond.

The UAE has substantially increased production capacity

The country has committed to investing US$145 billion (real, 2026) in its domestic upstream oil sector over 10 years to 2030. The overarching goals are to sustain oil production and expand capacity from under 4 million b/d in 2020 to 5 million b/d by 2027. By 2024, capacity had reached 4.85 million b/d.

OPEC+ quotas, however, have constrained output well below capacity, to the UAE’s growing frustration. In 2021, OPEC+ talks stalled as the UAE pushed for a higher baseline. The eventual compromise, to raise the baseline from 3.17 million b/d to 3.5 million b/d from May 2022, only partially reflected capacity growth.

OPEC’s oil price strategy dilemma

OPEC’s mission is to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilisation of oil markets. This has typically involved production restraint, with quota allocation and compliance an inevitable point of contention between OPEC members. Saudi Arabia, Kuwait and the UAE have traditionally been the members retaining material spare capacity. The UAE accounted for about 14% of OPEC capacity, so even with no change in UAE production policies, OPEC’s stature has been diminished as it exerts influence over a smaller fraction of the global oil market.

The UAE has the capability to take a growing share of global oil demand in 2027 and beyond, which challenges OPEC’s current policy of unwinding its voluntary cuts, and increases the risk of oversupply weakening prices. If tensions escalate, competition between the UAE and OPEC for market share could send medium-term oil prices sharply lower.

Who could leave OPEC next?

The US administration at some point could put pressure on Venezuela, a founder member, to withdraw from OPEC. However, the Trump administration has not indicated it is seeking this outcome. Alternatively, the US could leverage its role in the Venezuelan government as a means of monitoring or influencing OPEC decisions.
Announcement

On 28 April 2026, the UAE announced its exit from OPEC and OPEC+ effective on 1 May 2026. The country’s Ministry of Energy and Infrastructure said the decision follows a review of production policy and capacity outlook and aligns with its strategy to accelerate domestic energy investment. The UAE reaffirmed that its production policies will be responsible and guided by market stability.

Source: Wood Mackenzie