Why is the United Arab Emirates announcing its withdrawal from OPEC from May?

A surprise decision. This Tuesday, April 28, the United Arab Emirates slammed the door on the Organization of the Petroleum Exporting Countries (OPEC) in the name of their “national interest”, marking a setback for the alliance already shaken by the war in the Middle East. The Gulf country, which is among the largest producers in the world, will leave the group led by Riyadh and the OPEC + alliance also including Russia, from May 1, indicated the official Wam news agency.

“This decision reflects the UAE’s long-term strategic and economic vision as well as its evolving energy profile, including the acceleration of investments in domestic energy production,” she relayed. The Emirates, which joined the cartel in 1967, have “made significant contributions and made even greater sacrifices for the benefit of all.” But the time has come to focus our efforts on what our national interest dictates,” the news agency added.

Founded in 1960, OPEC, which now brings together 12 members under the leadership of Riyadh, formed an alliance in 2016 with ten other countries, including Moscow, in the form of an agreement called OPEC +, with the aim of limiting supply and supporting prices in the face of the challenges posed by American competition.

“Weakening” of OPEC

After the departure of Qatar in 2019, then of Ecuador and Angola, the announcement from Abu Dhabi created a surprise even if the country, eager to produce more, had made a dissonant voice heard within the group in recent years. He had also received preferential treatment to increase his production quotas more than the others.

The Emirates are among the countries most affected by attacks carried out by Iran in retaliation for the Israeli-American offensive launched on February 28 against the Islamic Republic. The conflict has caused a virtual closure of the Strait of Hormuz, through which a fifth of the world’s crude oil usually passes, causing prices to soar.

Given the current situation in the strategic canal, the UAE does not want to be subject to quotas once it returns to normal, according to a source close to the Ministry of Energy. For Jorge Leon, analyst at Rystad Energy, this withdrawal marks a major turning point for OPEC. “Along with Saudi Arabia, it is one of the few members with significant reserve capacity – the mechanism by which the group exerts its influence on the market,” he told AFP.

If the effects are likely to be limited in the short term, given the current disruptions linked to the war, “this will result in a structural weakening of OPEC in the longer term”, he believes. According to him, the Emirates could thus be tempted to increase their production, which would raise “questions about the sustainability of Saudi Arabia’s role” – suggesting a potentially more volatile oil market. Before the Middle East conflict, the UAE was fourth among 22 OPEC+ producers, behind Saudi Arabia, Russia and Iraq, with around 3.5 million barrels per day.