OPEC without the UAE: what analysts and economists say about the cartel's future and oil prices

The UAE's withdrawal from OPEC and OPEC+ was one of the most discussed news stories of the past week. Will both associations survive without such a large and influential player? What does the UAE's demarche really mean? And how will the decision to withdraw finally affect oil prices?

Friction between Abu Dhabi and OPEC+ escalated during the 2021 coronavirus pandemic, Kate Durian, a freelance researcher at the Gulf Arab States Institute, recalls in her article. At that time, the UAE opposed Saudi Arabia's plans to extend production cuts. The UAE argued that the new quotas did not take into account its rapidly growing production capacity.

The Emirates have invested billions of dollars to further expand their oil production capacity, which now stands at 4.85 million bpd and is expected to reach 5 million bpd by 2027. The official April quota of 3.4 million bpd, set before the Iran war, effectively meant unutilized production potential of 1.45 million bpd, angering Abu Dhabi.

Political factors may also have played a role. Once closely aligned, Saudi Arabia and the UAE have drifted apart on key regional issues, including the conflicts in Sudan and Yemen. In addition, Riyadh is now increasingly challenging the UAE's role as the Middle East's regional financial and trade center.

The US-Israeli war with Iran raises the stakes for the UAE, says Steve Hanke, professor of applied economics at Johns Hopkins University. The economist was a member of the country's Financial Advisory Council from 2008-2014.

According to Hanke, without OPEC quotas, the UAE can quickly increase oil production to maximize its profits at current prices, as the country understands that the oil era is moving towards the end. The outcome of the war is unpredictable, and the likelihood of a scenario in which the UAE can sell significantly less oil at lower prices in the future remains. In such circumstances, the "first priority" for the Emirates is to "take the money and run," the economist told Fortune.

However, the country now has difficulty getting oil to the world market, although it has an alternative delivery route that bypasses the Strait of Hormuz - through the port of Fujairah. In addition, the UAE's oil infrastructure, including the port, has previously been under attack from Iran.

The UAE's example may make some OPEC and OPEC+ members, who are also dissatisfied with the current quotas, think about withdrawal. The Emirates' decision complicates the situation for both the group's tacit leader, Saudi Arabia, and the cartel as a whole, says Robin Mills, head of Qamar Energy, a Dubai-based consultancy.

"OPEC+ will lose some cohesion. Kazakhstan will probably leave the group as well. It's another major producer that wants to grow," he told CNN.

Without the UAE, OPEC will be significantly weakened: the other major producers - Iran and Iraq - did not have any significant reserve capacity, writes oil industry expert Sergey Vakulenko on his Facebook page.

"If the UAE starts producing oil at the limit of its capacity and abdicates its role as an oil market regulator, this responsibility will fall predominantly on Saudi Arabia," he concludes.

The news of the UAE's withdrawal from OPEC and OPEC+ did not seriously affect oil quotations, analysts say. First, the country has now suspended production at offshore fields. Secondly, the closure of the Strait of Hormuz limits any impact on the market of other events, analysts of the international consulting company Wood McKenzie wrote.

The UAE has chosen a fortunate timing for its exit from OPEC. "Had the announcement been made at any other time, we would likely have witnessed stronger pressure on oil prices," ING analysts said. The decision would have been welcomed by US President Donald Trump as it weakens the influence of OPEC and OPEC+ in the oil market and should also be beneficial to importers and consumers. Another factor to watch is whether the UAE's withdrawal will lead to a further split among the remaining OPEC members, they wrote.

In the short term, however, oil prices will be influenced by events in the Persian Gulf and the timing of the resumption of oil supplies through the Strait of Hormuz.

While there are no signs of a speedy resolution of the conflict, ING analysts have raised their oil price forecast for the rest of the year. According to it, the average price of Brent oil Mark will be $104 per barrel in the II quarter of 2026 and $92 per barrel in the IV quarter of 2026. The previous forecast assumed a price of $96 and $88 per barrel, respectively.

This article was AI-translated and verified by a human editor