UAE to Leave OPEC and OPEC+, Gaining Independence in Oil Production

The United Arab Emirates (UAE) has announced that on May 1, it will leave both the Organization of the Petroleum Exporting Countries (OPEC) and the larger OPEC+ group. By withdrawing, the UAE will now be able to independently decide how much oil it produces and sells. This matters – and not just because the UAE is one of the world’s top ten oil producers. The country also has the capacity to increase its output by about one million barrels per day. So, if the UAE chooses to ramp up production, could it put downward pressure on the price of oil once shipments can resume through the Strait of Hormuz? With severe geopolitical tensions still disrupting the market, the immediate question is less about when we can expect cheaper oil and more about how the uncertainty feeds into what comes next. OPEC was founded in 1960 to “harmonise the petroleum policies of its member countries as part of its efforts to safeguard their interests”. Iran, Iraq, Kuwait, Saudi Arabia and Venezuela were the five founding members. The Emirate of Abu Dhabi became a member in 1967, and the UAE as a whole remained a member after the country’s federation in 1971. It is currently the third-largest oil producer among members, trailing Saudi Arabia and Iraq. The group will have 11 members after the UAE exits on May 1. OPEC+ is a larger group of oil-producing countries (including Russia) that also works together to set oil policy. OPEC’s statute states the organisation will "devise ways and means of ensuring the stabilisation of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations." In practice, that means collectively agreeing on and setting production quotas for its member countries, allowing it to influence global oil prices. OPEC is widely referred to as a cartel . In broad terms, this refers to a group of producers who would otherwise be in competition but instead agree to work together to control supply and set prices. But OPEC and some of its members have repeatedly rejected this characterisation, saying the group does not operate as a cartel.