UAE Quits OPEC in Major Blow to Global Oil Producers’ Group

By Maha El Dahan

DUBAI, April 28 (Reuters) – The United Arab Emirates said on Tuesday it was quitting OPEC, dealing a heavy blow to the oil producers’ group as an unprecedented energy crisis triggered by the Iran war exposes discord among Gulf nations.

The loss of the UAE, a longstanding OPEC member, could weaken the group, which has usually sought to show a united front despite internal disagreements over geopolitics and production quotas.

UAE Energy Minister Suhail Mohamed al-Mazrouei told Reuters the decision was taken after a careful look at the regional power’s energy strategies.

Asked whether the UAE consulted with OPEC’s de facto leader and regional heavyweight Saudi Arabia, he said the UAE did not raise the issue with any other country.

“This is a policy decision, it has been done after a careful look at current and future policies related to level of production,” said the energy minister.

The UAE’s announcement trimmed gains in oil prices on Tuesday.

PRODUCTION CONSTRAINED BY IRAN WAR 

OPEC Gulf producers have been struggling to ship exports through the Strait of Hormuz, a chokepoint between Iran and Oman through which a fifth of the world’s crude oil and liquefied natural gas normally passes, because of Iranian threats and attacks against vessels.

Mazrouei said the UAE’s move, in which it will leave OPEC and OPEC+ as of May 1, would not have a huge impact on the market because of the constraints in the strait.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia are known collectively as OPEC+, and the UAE was their fourth-largest producer. Together they controlled nearly half the world’s oil before the war. 

The International Energy Agency said OPEC+ saw its share of global oil output fall to 44% in March from about 48% in February. It is likely to fall further in April as production shut-ins become more pronounced.

“This opens the door for the UAE to gain global market share when the geopolitical situation normalizes,” said Monica Malik, chief economist at ADCB.

The exit should be positive for consumers and the broader global economy, she added.

The UAE is a regional business and financial hub and one of Washington’s most important allies. It has pursued an assertive foreign policy and carved its own sphere of influence across the Middle East and Africa.

The UAE has recently doubled down on its relationships with the United States and Israel, with which it opened ties in the 2020 Abraham Accords, especially after coming under attack during the Iran war. It views the relationship with Israel as a critical lever for regional influence and a unique channel to Washington.

WIN FOR TRUMP

The UAE’s exit from OPEC represents a win for U.S. President Donald Trump, who in a 2018 address to the U.N. General Assembly accused the organization of “ripping off the rest of the world” by inflating oil prices.

Trump has also linked U.S. military support for the Gulf with oil prices, saying that while the U.S. defends OPEC members they “exploit this by imposing high oil prices.” 

The UAE’s departure came after Anwar Gargash, the diplomatic adviser for the UAE president, criticized the Arab and Gulf response to recent Iranian attacks in a session at the Gulf Influencers Forum on Monday.

Some Gulf leaders met in person on Tuesday in Saudi Arabia, a summit that a Gulf official said aimed to craft a response to the thousands of Iranian missile and drone strikes their nations have faced since the U.S. and Israel launched their war with Iran in late February.

The UAE’s OPEC exit also comes as global spare capacity hovers at historically low levels, leaving the oil market increasingly tight.

Operating outside the producer group allows the UAE to fully leverage its position as a supplier of some of the world’s lowest-cost and lowest-carbon barrels. 

Mazrouei noted the UAE has been a member of OPEC and OPEC+ for a long time, but he said the world would demand more energy, suggesting his country’s move will help meet those needs.

(Additional reporting by Nayera Abdallah and Yousef Saba; Writing by Michael Georgy; Editing by Aidan Lewis)

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This article contains reporting from Reuters, published under license.

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