"The cartel has lost its former influence": what does the Arab Emirates' exit from OPEC mean?

The withdrawal of the third largest oil producer in the group from OPEC could weaken the cartel's influence and increase volatility amid the geopolitical crisis, analysts warned, commenting on the UAE's decision to withdraw from OPEC. This step, experts warn, threatens long-term consequences for the oil market and the organization itself. The Arab Emirates is going to withdraw from OPEC on Ma 1.

- "The Emirates were unhappy about having to curb [oil] production, especially when they wanted to ramp up production and Saudi Arabia wanted to cut back," said Firas Maqsad, head of Eurasia Group's Middle East division, whose opinion is quoted by the Financial Times. Some of the political differences between OPEC members have intensified due to positions on the war in the Middle East and reactions to the threat from Iran: the UAE is increasing cooperation with the U.S. and Israel, while other countries are diversifying and insuring risks, Maxad added.

- "Without the UAE, the organization [of oil-exporting countries] will become 'structurally weaker' as Saudi Arabia will remain the only participant with significant spare capacity," the FT quoted Jorge Leon, head of geopolitical analysis at Rystad Energy, as saying. Oil markets could become more volatile as OPEC's ability to smooth out supply shortages will diminish, he added.

- "The cartel has lost its previous influence as Venezuela is now a de facto puppet of the U.S. and the U.S. has become the global regulatory producer; the UAE will benefit from the ability to work more closely with them," said Panmure Liberum energy analyst Ashley Kelty(quoted by MarketWatch).

- "The UAE's announcement of its withdrawal from OPEC is a major crack [in the group], possibly the largest in the organization's history," oil market researcher and founder of Commodity Context Corp. wrote in a post on social networking site X. Rory Johnston. Although the UAE was formally behind Iraq in terms of oil production, it had significantly more spare capacity and much more political clout within OPEC itself, making the Emirates the second most important player in the organization after Saudi Arabia, Johnston said. Without the UAE, OPEC becomes a "less effective regulator" of the oil market, and in the future it may become even more dependent on Saudi Arabia than before, which increases the likelihood of more exporting countries leaving the organization, Johnston said.

- Although the UAE has already promised to gradually increase oil production after its withdrawal from OPEC, it is almost impossible at the moment, states Michael Brown, senior research strategist at Pepperstone, whose opinion is quoted by MarketWatch. Shipping through the Strait of Hormuz, through which the UAE exports its oil, has been virtually blocked for two months amid the ongoing war in the Middle East.

The UAE is not the first country to withdraw from OPEC. Earlier, in 2019, Qatar did so. Then Qatar's Energy Minister Saad al-Qaami said in an interview with CNBC that the decision to withdraw was not political, but was dictated by the country's desire to focus on natural gas production. Also leaving OPEC was Ecuador in 1992, but returned 15 years later to the organization. In early 2020, the country again left the association of oil-producing countries due to financial problems, recalls Reuters.

The UAE's withdrawal from OPEC became known on April 28. Including on the background of this news, Brent oil on April 28 rose by 2.6% to $111, and the U.S. WTI traded at $99.4, showing growth of 3.1% relative to the last closing price.

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