The decision by the United Arab Emirates to leave the oil producers’ cartel Opec after 59 years is more than a symbolic break. It highlights a growing divide among major oil producers over how to respond to a changing energy landscape, and will weaken the group’s ability to manage global supply.
In the short term, the impact of the UAE’s exit will be limited. The world still needs every available barrel of oil, and the UAE accounts for some 3-4% of global production. But the forces behind the decision are more significant than the move itself. They are both economic and political – and the war in Iran helped the two align.
For years, the UAE has been investing heavily to expand its oil production capacity, spending around US$150 billion (£111 billion) to push its potential daily output close to 5 million barrels. But Opec quotas have prevented it from fully exploiting that capacity. Actual production has remained well below its potential at about 3.5 million barrels a day (mbd), with some 5 mbd capacity, constrained by the Opec quota system designed to restrict supply and support prices, generally shaped by the de facto leader, Saudi Arabia.
Opec
This has created a tension. Why invest to produce more oil if you are not allowed to sell it?
Abu Dhabi’s answer reflects a different economic model. The UAE can balance its budget at much lower oil prices than Saudi Arabia (just below $50 v Saudi $90 a barrel or more), giving it less incentive to restrict output. Instead, it has prioritised maximising its oil exports.
That strategy is also shaped by expectations about the future. As countries such as China accelerate the electrification of transport, the hitherto steady and reliable demand for oil is slowing and becoming less reliable. Over time, it is likely to plateau. UAE is also well ahead of the Saudis in energy transition – and maintain their net zero target as 2050, compared to the Saudi 2060.
From the UAE’s perspective, the bigger risk is not falling prices, but leaving oil in the ground that may never be sold.
Shifting geopolitics
The timing of the exit is not just about economics. It also reflects shifting political and security calculations, particularly after the UAE came under heavy, sustained attack during the war in Iran.
In Abu Dhabi, there is a growing sense that regional institutions and partnerships, such as the Gulf Cooperation Council (GCC) offered limited support during that period. Anwar Gargash, a senior presidential adviser, told reporters that: “The GCC’s stance was the weakest historically, considering the nature of the attack and the threat it posed to everyone,” adding that he “expected such a weak stance from the Arab League … But I don’t expect it from the GCC, and I am surprised by it.”
That experience has reinforced a more independent foreign policy. The UAE has strengthened ties with the US and Israel, building on the agreement it signed as part of the 2020 Abraham accords. The relationship with Israel is seen not just an economic and security partnership, but as a channel for influence inside the White House.
At the same time, relations with Saudi Arabia have become more strained, with differences over regional conflicts in Somalia and Yemen and economic strategy increasingly visible. Leaving Opec is both an economic decision and a geopolitical signal.
The UAE’s departure also raises questions about the future of Opec itself. The group once controlled more than half of global oil production. Today, its share is much smaller (no more than 35%), and internal divisions over production quotas are more pronounced. Quotas, long the core of its strategy, are increasingly seen as uneven constraints rather than shared commitments.
Saudi Arabia remains the only member with significant spare capacity, giving it outsized influence. The result is an organisation that still matters, but is less cohesive than it once was.
Not necessarily a win for the US
Some have hailed the UAE’s exit as a victory for Donald Trump, who has repeatedly criticised Opec for keeping oil prices high. A weaker OPEC would indeed lead to higher output and lower prices at the pump.
But sustained lower prices would also put pressure on higher-cost producers, including the US oil patch, which has been one of Opec’s main competitors in recent years. It benefited from the cartel’s restraint when it came to capping oil production. So what now looks like a geopolitical win could, over time, become an economic challenge.
For now, I believe that the UAE’s exit will not dramatically reshape oil markets. Demand remains strong enough to absorb additional supply, particularly as countries rebuild their inventories when Iran reopens the Strait of Hormuz. But the deeper significance lies in what the decision reveals.
Oil producers are no longer aligned around a single strategy. Some are trying to manage scarcity and keep prices high. Others are racing to monetise their resources before demand peaks and they end up with stranded assets. That divergence is likely to grow – and may ultimately prove more consequential than any single country leaving the cartel.
We may be entering a new age where oil is going to play a much lesser role in our lives.
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