UAE to Exit OPEC and OPEC+ in May 2024, Reshaping Global Oil Dynamics

The United Arab Emirates (UAE) announced on March 5, 2024, that it will withdraw from both OPEC and the broader OPEC+ alliance effective May 1, 2024. The decision strips the oil cartel of one of its largest producers and further weakens its influence over global oil supplies and pricing.

The UAE’s move had been anticipated for years, as it increasingly resisted OPEC’s production quotas, which it argued were too restrictive. Capital Economics noted in an analysis:

"Having invested heavily in expanding energy production capacity in recent years, the bigger picture is that the UAE has been itching to pump more oil."

The decision also underscores deepening regional tensions. The UAE has grown increasingly at odds with Saudi Arabia, OPEC’s largest producer, over political and economic disputes in the Middle East, despite both nations facing attacks from fellow OPEC member Iran during the ongoing conflict.

Limited Immediate Impact on Global Oil Markets

The UAE’s exit from OPEC and OPEC+ is unlikely to cause immediate disruptions in global oil markets. Current supply constraints due to the war in Iran have closed the Strait of Hormuz, a critical chokepoint through which 20% of global oil supplies—including much of the UAE’s—are transported. On the day of the announcement, Brent crude, the international oil benchmark, traded above $111 per barrel, more than 50% higher than its pre-war price.

OPEC’s Declining Influence Amid U.S. Oil Dominance

OPEC’s market power has been eroding for years, particularly as the United States has ramped up crude oil production. Before the war, Saudi Arabia was pumping over 10 million barrels per day, while the U.S. produces more than 13 million barrels per day. U.S. President Donald Trump has been a vocal critic of OPEC during his two terms in office.

The UAE, which joined OPEC in 1967 through its emirate of Abu Dhabi, was producing around 3.4 million barrels of crude per day just before the U.S.-Israeli conflict with Iran began on February 28, 2024. Analysts estimate the UAE has the capacity to produce roughly 5 million barrels per day.

Strategic and Economic Rationale Behind the Withdrawal

In its announcement via the state-run WAM news agency, the UAE stated that its decision reflects a long-term strategic and economic vision, including accelerated investment in domestic energy production. The country added that it would bring additional production to market gradually and in alignment with demand and market conditions.

Jorge Leon, head of geopolitical analysis at Rystad Energy, noted that the UAE’s withdrawal removes one of OPEC’s few members with the ability to quickly increase production.

"A structurally weaker OPEC, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilize prices,"

The UAE’s departure follows the 2019 exit of Qatar from OPEC, further signaling a fragmentation of the cartel’s unity.