UAE Withdraws from OPEC, Saudi Loses a Major Player in the Oil Market

JAKARTA - The United Arab Emirates (UAE) will leave OPEC starting May 1. This decision is a blow to OPEC+ because the UAE is the fourth largest producer in the organization.

Malay Mail, citing Reuters, Wednesday, April 29, reported that the decision surprised a number of OPEC+ sources. Five sources said the UAE's move came unexpectedly. Four of them assessed that the departure of Abu Dhabi would make OPEC+ more difficult to regulate the balance of supply and demand for oil.

The UAE has been an OPEC member for almost 60 years. After leaving, Abu Dhabi is no longer bound by production targets that OPEC+ has used to hold or increase supplies.

Before the US-Israeli war on Iran disrupted oil shipments in the Gulf, the UAE pumped around 3.4 million barrels per day or about 3 percent of the world's crude oil supply. According to the report, the UAE's production capacity could reach 5 million barrels per day for crude oil and oil liquids.

Tensions between the UAE and Saudi Arabia emerged due to production quotas. The UAE requested a larger quota after expanding capacity through an investment program worth US$150 billion. However, the UAE's quota is still in the range of 3.5 million barrels per day.

Still referring to the Malay Mail report, Helima Croft of RBC Capital Markets said Abu Dhabi has long wanted to cash in on the huge investment. But the US-Israeli war against Iran slowed down the plan after drones and rockets damaged UAE production facilities.

Rumors of the UAE's exit from OPEC+ have been circulating for years. Abu Dhabi and Riyadh's relations have also deteriorated due to differences in attitudes in conflicts in Sudan, Somalia, and Yemen. The UAE is also getting closer to the United States and Israel.

Even so, OPEC+ is not expected to break up immediately. Iraq, the third largest producer in OPEC+ after Saudi Arabia and Russia, said it had no plans to leave because it still wanted a stable oil price.

Gary Ross, a long-time OPEC watcher and CEO of Black Gold Investors, believes Saudi Arabia will still use OPEC+ to manage the market. According to Ross, Saudi Arabia remains a pivot because it has a large reserve capacity.

The UAE is the fourth country to leave OPEC+ in recent years, after Angola, Ecuador, and Qatar. But the UAE is the largest.

According to data from the International Energy Agency (IEA) quoted by Reuters, OPEC's influence is indeed continuing to decline. The organization, which was founded in 1960, once controlled more than half of the world's oil production. Now its share is around 30 percent. OPEC+ once controlled about 50 percent of global production in 2025. Without the UAE, control is expected to fall to around 45 percent.

OPEC is still an important player. But the departure of the UAE gives the oil market a strong reason to recalculate.