UAE’s OPEC exit may not hit oil markets, say executives
New Delhi: The UAE's exit from the Organization of the Petroleum Exporting Countries (OPEC) is likely to have greater implications for geopolitics in the Persian Gulf than for global oil markets grappling with the impact of the Iran conflict, said industry executives.
In February, before the Iran war, the UAE produced about 3.6 million barrels per day (mbd)-accounting for roughly 12% of OPEC output and around 8% of OPEC+ supplies. Its production was comparable to Iran's and trailed only Saudi Arabia and Iraq within OPEC. Even without the UAE, the OPEC+ oil-producing nations would still account for nearly 40% of global supply, retaining significant market influence.
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The UAE has also been a reliable energy partner for India, supplying about 9% of its crude imports along with natural gas and LPG.
With the oil market already weighed down by the Iran war, the UAE's departure is unlikely to have any immediate impact on prices or supplies, an oil industry executive said.
UAE Free to Boost Output
However, the response of smaller members will be closely watched, as the move could trigger fresh friction within the producer group.
Freed from OPEC production quotas, Abu Dhabi can raise output in line with its higher capacity of 4.28 mbd-a longstanding demand that had been a source of tension with other members, particularly Saudi Arabia, OPEC's de facto leader.
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Higher oil production could boost UAE revenues at a time when other income streams are under pressure from the war, which has upended its reputation as a stable investment destination, triggered an exodus of expatriates, and hit tourism, shipping, and real estate sectors. With the war's economic impact likely to linger, stronger oil revenues could provide a crucial cushion.
"The decision (to exit OPEC) follows a comprehensive review of the UAE's production policy and its current and future capacity and is based on our national interest and our commitment to contributing effectively to meeting the market's pressing needs," the UAE's Ministry of Energy and Infrastructure said on Tuesday.
The trigger for the exit, and its broader implications, lie more in regional politics than in oil market dynamics, a second industry executive said, pointing to a growing divergence between Abu Dhabi and Riyadh. The move underscores simmering tensions between the two, once close allies that have increasingly competed for regional economic influence and investment.
The Iran war appears to have widened these differences, with the UAE bearing a greater economic impact than Saudi Arabia and expecting more support from Arab nations during the conflict.
OPEC is a group of dozen oil-producing nations that coordinate output to manage global supply. Its members also work with a broader set of producers, led by Russia, in the OPEC+ framework.
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