The United Arab Emirates announced today that it will withdraw from OPEC and OPEC+ on May 1, dealing a heavy blow to the oil-exporting organizations and to their de facto leader, Saudi Arabia, at a time when the war in Iran has caused a historic energy shock and disrupted the global economy.
The departure of the UAE, a long-standing OPEC member, could create disorder and weaken OPEC, which usually seeks to present a united front despite internal disagreements on a range of issues, from geopolitics to production quotas.
OPEC is the organization made up mainly of oil-producing Gulf countries, which for many decades controlled crude oil prices by reducing or increasing production and allocating shares among its members. It played a vital role in the oil crises of the 1970s, which in turn transformed global energy policy.
The UAE was the second most important producer (behind Saudi Arabia) and was able to raise or lower output, helping stabilize prices.
The UAE will no longer be subject to production caps set by the organization, making use of the significant production capacity in which it has invested. The cap is set at 3–3.5 million barrels per day, while the Emirates aim to reach production of 5 million barrels per day, via sea routes or pipelines they have built, bypassing the Strait of Hormuz.
Although the UAE says this move will not have a huge impact on the market because of the situation in the Strait, its exit from OPEC nonetheless represents a victory for U.S. President Donald Trump, who accused the organization of “robbing the rest of the world” by inflating oil prices.
Sources: Reuters, BBC
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