UAE leaves OPEC, OPEC+ in major blow to oil producers' group

The United Arab Emirates (UAE) said on Tuesday it was quitting OPEC and OPEC+, dealing a heavy blow to the oil exporting groups and their de facto leader, Saudi Arabia, at a time when the Iran war has caused a historic energy shock and unsettled the global economy.

The loss of the UAE, a longstanding OPEC member, could create disarray and weaken the group, which has usually sought to show a united front despite internal disagreements over a range of issues from geopolitics to production quotas.

UAE Energy Minister Suhail Mohamed al-Mazrouei told Reuters the decision was taken after a careful look at ⁠the regional power's energy strategies.

Asked whether the UAE consulted with Saudi Arabia, he said the UAE did not raise the issue with any other country.

"This is a policy decision, it has been done after a careful look at current and future policies related to level of production," said the energy minister.

OPEC Gulf producers have already been struggling to ship exports through the Strait of Hormuz, a chokepoint between Iran and Oman through which a fifth of the world’s crude oil and liquefied natural gas normally passes, because of Iranian threats and attacks against vessels.

Mazrouei said the move would not have a huge impact on the market because of the situation in ⁠the strait.

But the UAE exit from OPEC represents a win for US President Donald Trump, who has accused the organisation of "ripping off the rest of the world" by inflating oil prices.

Trump has also linked US military support for the Gulf with oil prices, saying that while the US defends OPEC members they "exploit this by imposing high oil prices".

The move came ⁠after the UAE, a regional business hub and one of Washington's most important allies, criticised fellow Arab states for not doing enough to protect it from numerous Iranian attacks during the war.

Anwar Gargash, the diplomatic adviser for the UAE president, criticised ⁠the Arab and Gulf response to the Iranian attacks in a session at the Gulf Influencers Forum on Monday.

"The Gulf Cooperation Council countries supported each other logistically, but politically and militarily, I think their position ⁠has been the weakest historically," Gargash said.

"I expect this weak stance from the Arab League and I am not surprised by it, but I haven't expected it from the (Gulf) Cooperation Council and I am surprised by it," he said.

Analyst reactions

Jorge Leon, analyst at Rystad:

"The UAE withdrawal marks a significant shift for OPEC. Alongside Saudi Arabia, it is one of the few members with meaningful spare capacity – the mechanism through which the group exerts market influence."

"While near-term effects may be muted given ongoing disruptions in the Strait of Hormuz, the longer-term implication is a structurally weaker OPEC. Outside the group, the UAE would have both the incentive and the ability to increase production, raising broader questions about the sustainability of Saudi Arabia’s role as the market’s central stabiliser - and pointing to a potentially more volatile oil market as OPEC’s capacity to smooth supply imbalances diminishes."

Ajay Parmar, director of energy and refining at ICIS:

"The UAE has been in disagreement with general OPEC policy for quite some time. So it's not a surprise, but it will certainly have a significant impact in the long term. It also signifies the general drift in the historically strong alliance between the UAE and Saudi Arabia."

Sergey Vakulenko from Carnegie Russia Eurasia Center, former Gazprom Neft executive:

"The UAE has been planning to grow oil production by up to 30%, and it would be difficult to do so within the limitations of OPEC and OPEC+.

"Now, is probably the least damaging time to announce it – oil prices are high, and there are genuine shortages because of Hormuz closure. After Hormuz reopens, there will be elevated demand as countries will be replenishing reserves that were drawn down since February, so prices will stay high".

"Without the UAE, OPEC will be much weaker, other major producers, Iran and Iraq, did not maintain any substantial spare capacity. It was mostly done by UAE and Saudi Arabia."