The United Arab Emirates’ decision to leave OPEC will sharply diminish the 65-year-old producer group’s influence over the oil market, opening the door to an all-out price war once Gulf producers rush to regain market share when the Iran war is over. The surprise move comes at a time of unprecedented turmoil in energy markets as Gulf oil and gas exports have remained largely paralysed for two months due to the closure of the Strait of Hormuz, which has muted OPEC’s traditional ability to manage the oil market during times of distress. UAE Energy Minister Suhail Mohamed al-Mazrouei told Reuters on Tuesday the decision to leave the Organization of the Petroleum Exporting Countries was driven by the need to meet rising global energy demand.
That may be the case, but the freedom to ramp up production without constraints was likely an equally powerful – if less altruistic – motive. The UAE was in February OPEC’s fourth-largest producer after Saudi Arabia, Iran and Iraq, accounting for about 12% of total output, according to the International Energy Agency.
The UAE has a capacity of around 4.85 million barrels per day (bpd) and aims to lift that to 5 million bpd by 2027 – ambitions that sat uneasily with OPEC’s ongoing output curbs. Speculation that the UAE would quit OPEC had been circulating for years. Like other Gulf producers, the UAE sits on vast oil reserves and enjoys some of the world’s lowest extraction costs. This means it is in a strong position to generate profits even during prolonged periods of low prices. That advantage has made Saudi-mandated production curbs progressively harder to justify from Abu Dhabi’s perspective. While the curbs prop up prices, they also cap revenue and can cede market share to higher-cost rivals. On top of this, there is a finite window to monetise hydrocarbons. Oil consumption is widely expected to peak in the coming decades and start declining as economies shift towards renewables. Producers thus have more incentive to maximise output now rather than restrain it in defence of long-term price stability. As Saudi Arabia has struggled to rein in overproduction in recent years, the UAE has frequently exceeded its assigned quotas, leaving relations between Riyadh and Abu Dhabi increasingly fraught.
The Saudi-UAE tensions have spilled beyond oil, into conflicts in Yemen, Libya, and Sudan. More recently, the two Gulf powers have differed in their public responses to Iran’s strikes.
The UAE’s dramatic move thus not only marks a watershed moment for OPEC but also potentially a turning point for power relations in the Gulf itself.
A BLOW TO SAUDI
Riyadh’s de facto leadership of OPEC has long been a central pillar of its strategy to project international power and dominate the region. The departure of a key, long-standing OPEC member severely weakens this already fraying alliance. It has come under strain repeatedly this year, first from the U.S. removal of Venezuela’s President Nicolas Maduro, then from the Iran war itself. OPEC, which currently has 12 members including the UAE, has for decades attempted to regulate the oil market by jointly managing crude output. While the group controls roughly 80% of global oil reserves, its share of global production has fallen from about 50% in the 1970s to roughly 30% today. Conflicts within some member states are partly responsible, but the bigger shift has been the surge of non-OPEC supply, particularly from the U.S., Canada and Brazil.
The OPEC+ alliance, formed in 2016 to include Russia, briefly restored some of that lost influence. Encompassing more than 40% of global production, it proved an effective tool in managing supply disruptions and price volatility. That coherence, however, depended heavily on Saudi Arabia’s ability to enforce discipline.
The UAE’s exit not only further erodes OPEC’s market share but may also encourage other OPEC+ members to question the value of limiting output, weakening collective decision-making and raising the risk of further defections.
More importantly, once the Iran war ends, this new dynamic could mark the opening shot in a bitter struggle for market share among major producers – OPEC+, the UAE and the U.S. – potentially triggering a sharp drop in oil prices and years of turbulence.
GOOD, POOR TIMING
At first glance, the timing could hardly be worse. The Middle East is reeling from the Iran war. The near-airtight closure of the Strait of Hormuz – now in its third month – has trapped more than 13 million bpd of oil production, roughly 13% of global supplies, as well as about a fifth of global liquefied natural gas flows. The blockade has choked off vital revenue to the region and forced producers to shut in close to 10 million bpd.
Compounding the shock, Tehran has launched thousands of missiles and drones at neighbouring OPEC members, inflicting heavy economic damage and crippling energy facilities. Looked at differently, Iran’s assault on the UAE, Saudi Arabia, Kuwait and Iraq – all fellow OPEC members – was bound to accelerate this split, underscoring the fragility of the group’s unity. Shared membership has proven no guarantee of shared interests when national security and revenue are at stake.
Indeed, Abu Dhabi has criticised fellow Arab states for failing to do enough to protect it from Iranian attacks, underscoring the extent to which security concerns have bled into economic decision-making.
Perhaps most importantly, the turmoil has handed the UAE a convenient moment to exit without having much immediate impact on physical supply or prices. The UAE is not the first country to walk away from OPEC. Qatar left in 2019, Ecuador in 2020 and Angola in 2024. But none departed with the scale, spare capacity and regional clout of Abu Dhabi.
This time is different. The loss of a heavyweight producer with ambitions to rapidly expand output risks stripping OPEC of what remains of its authority. Once the Iran war subsides and barrels return to market, the group may find itself less unified than ever, suggesting that OPEC as we know it is gone.
(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.)
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(Ron Bousso; Editing by Marguerita Choy)