On 1st May, the United Arab Emirates officially withdrew from the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ framework. This decision marked the end of nearly 60 years of membership and signaled the start of a new, unpredictable era in the Middle East’s energy landscape. While this move may seem like a self-directed adjustment by oil-producing countries to their energy cooperation model, it actually reflects profound changes in global oil governance, the Gulf’s energy structure, energy security, and the development strategies of oil-producing nations.
I. UAE’s OPEC Withdrawal: From Quota Constraints to Energy Autonomy
The UAE’s withdrawal from OPEC and OPEC+ primarily reflects the growing tension between production capacity and national development strategies. The core function of OPEC is to influence the balance of oil supply and demand, as well as price expectations, through coordinated production quotas. For oil-producing countries that are heavily reliant on oil revenue, with price stability as a top priority, the quota system holds significant policy value. However, for the UAE, as upstream investments increase, production capacity expands, and the non-oil economy grows, its policy goals are no longer fully aligned with the traditional approach of “production cuts to maintain prices.”
The UAE’s core challenge lies in the growing tension between expanding oil production capacity and the constraints of OPEC’s production quotas. The UAE plans to increase its oil production capacity to 5 million barrels per day by 2027, but the current production allocation mechanism does not align with its potential capacity. As production capacity continues to grow, the UAE’s dissatisfaction with the established production limits has intensified, and the desire for greater energy policy autonomy has become a core driving force behind its exit from OPEC.
In addition to the demands of production capacity, the profound transformation of the domestic economic structure also provides key economic support for this decision. According to the UAE Federal Competitiveness and Statistics Centre, in the first quarter of 2025, the UAE’s real GDP grew by 3.9% year-on-year, reaching 455 billion dirhams; of this, non-oil GDP grew by 5.3%, amounting to 352 billion dirhams, and the non-oil economy accounted for 77.3% of the total real GDP.[1] This indicates that, while the UAE remains a major oil producer globally, its economic growth and fiscal revenue are no longer heavily reliant on the oil industry. Therefore, the UAE’s withdrawal is not just about disengaging from the oil cooperation system but about refusing to remain constrained by alliance regulations focused on collective production cuts. After freeing itself from quota constraints, the UAE may still face challenges such as oil price fluctuations, shipping security, trade cooperation, and industrial investment, but its domestic energy production decisions will no longer be limited by the alliance’s allocation system, fully serving its long-term development strategy.
II. From Oil Coordination to Industrial Competition in the Gulf Economic Landscape
The UAE’s withdrawal from OPEC and OPEC+ has altered the cooperation framework among oil-producing countries in the Gulf region. Over the past decade, the OPEC+ system has relied heavily on bilateral coordination between Saudi Arabia and Russia, along with key oil producers such as the UAE, Iraq, Kuwait, and Kazakhstan, to sustain its operations. Given the current global oil supply tightness, the OPEC+ framework can still function, and the likelihood of a price war in the short term is low. However, maintaining the mechanism does not guarantee that its ability to jointly regulate and negotiate will not weaken.
The UAE’s exit will undoubtedly have a significant impact on OPEC. While the organization may continue to exist, its overall influence will likely decline. At the same time, OPEC’s global market share is shrinking, while non-OPEC oil-producing countries’ production capacities continue to expand, reshaping the global oil supply and demand structure. In this context, energy governance in the Gulf is evolving, gradually moving away from the former collaborative model of unified production cuts and price stabilization, and shifting toward differentiated energy development strategies, which each country will autonomously devise based on its fiscal situation, production capacity planning, industrial layout, and geopolitical security concerns.
For the UAE, the direct economic benefits of its withdrawal depend on two factors: first, the extent to which the passage through the Strait of Hormuz is restored; and second, whether its increased production can be converted into exportable volume. According to data from the U.S. Energy Information Administration, in 2024, an average of 20 million barrels of oil per day passed through the Strait of Hormuz, accounting for about 20% of global oil liquid consumption. The strait is also a critical hub for global seaborne oil and liquefied natural gas (LNG) trade.[2] In the event of restrictions in the strait, even without OPEC quota constraints, the UAE would still find it challenging to immediately convert its production capacity into export revenues. Therefore, in the short term, the withdrawal will not directly affect the UAE’s credit metrics, but in the medium to long term, it may help improve oil revenues and its sovereign asset balance sheet.
For Saudi Arabia, the UAE’s exit undermines the foundation of coordination within the OPEC system. For a long time, Saudi Arabia has maintained stability in the energy market by using flexible production adjustments to guide global oil price expectations. With the departure of the UAE, a core Gulf member country with ample capacity, strong fiscal health, and a diversified economy, Saudi Arabia now faces significantly increased difficulty and cost in maintaining collective action within the alliance. Although OPEC+ can still rely on key countries like Saudi Arabia, Russia, Iraq, and Kuwait to collaborate on production levels, the policy signals released by this mechanism may lose both their scope and market credibility.
For other Gulf economies, this event may intensify two types of pressure. The first is fiscal pressure. If the UAE increases exports after the passage is restored, it could boost market supply in the medium to long term, putting downward pressure on oil prices. Oil-dependent countries that rely on high oil prices will face stronger budget constraints. The second is industrial competition pressure. The UAE’s non-oil economy has already developed diverse pillars, such as trade, finance, tourism, aviation, ports, and the digital economy. After exiting OPEC, its use of energy revenues may shift more toward long-term industrial investments, rather than merely maintaining oil price stability. As a result, Gulf economic competition will evolve beyond the competition for oil fiscal capacity, becoming a comprehensive contest involving energy revenues, capital deployment, industrial systems, and global strategic positioning.
However, this competition does not necessarily lead to regional economic disorder. On the contrary, the UAE’s withdrawal may encourage Gulf economies to more clearly define their respective development models. Saudi Arabia continues to pursue economic diversification through its “Vision 2030”, Qatar is expanding through natural gas and LNG, the UAE is strengthening trade, finance, and energy investments in parallel, and Oman and Kuwait are seeking a balance between fiscal reform and industrial transformation. Divergence does not equate to division, but it does mean that Gulf economic coordination will increasingly rely on specific projects, bilateral relations, and security environments, rather than primarily on a single energy organization framework.
III. OPEC Coordination Mechanism Moving Towards Contraction
After the UAE’s withdrawal, OPEC’s operational logic will undergo a profound transformation. According to a Reuters report on 29 April, OPEC+ is expected to continue discussions on a modest production increase without the UAE’s participation, targeting an increase of approximately 188,000 barrels per day, nearly the same as the previous increase of 206,000 barrels per day, minus the UAE’s share. The report also noted that, following the UAE’s exit on 1 May, the core countries involved in monthly production decisions will primarily include Saudi Arabia, Iraq, Kuwait, Algeria, Kazakhstan, Russia, and Oman.[3]
This change indicates that OPEC+ may shift from formal coordination within a broad membership framework to more pragmatic coordination among a smaller group of core members. While this approach can maintain the minimal operational capacity of the mechanism, it will also lead to three key issues. First, reduced representativeness. The UAE is an important oil producer within OPEC+, and its withdrawal will diminish the organization’s ability to adjust actual production capacity. Second, decreased enforcement. Fewer members make coordination easier, but market confidence in their ability to regulate global supply will also decrease. Third, diminished capacity to absorb external shocks. When factors such as war, transportation issues, sanctions, and infrastructure attacks simultaneously affect supply, OPEC+ will need more backup capacity and stricter member discipline. The UAE’s exit weakens this redundancy capacity.
However, a price war is not the most likely scenario at this time. The reason is that price wars typically occur in the context of oversupply, when members compete for market share and organizational discipline breaks down. Currently, the market is facing supply shortages, transportation constraints, and rising risk premiums. Russia has also clearly stated that, given the global oil shortages, it does not believe the UAE’s exit will immediately trigger a price war. Therefore, in the short term, a more accurate assessment is that while OPEC+’s authority will decline, market supply tightness will still prevent intense price competition among members.
In the medium to long term, OPEC+ faces the challenge of managing the increasingly evident differences in development strategies among its member states. Saudi Arabia requires stable oil prices to support fiscal needs and large investment projects; Russia, under sanctions and wartime conditions, prioritizes stable export revenues; countries like Iraq and Kuwait, constrained by fiscal and political structures, have different demands regarding production quotas; and the UAE places more emphasis on recovering investments in production capacity and economic structural transformation. In the past, OPEC+ temporarily bridged these differences within the same framework through collective production cuts. The UAE’s withdrawal highlights that, when member countries’ development stages, fiscal resilience, and energy strategies diverge, the coordination costs of the traditional quota system increase rapidly.
IV. Global Oil Market Impact: Short-Term Focus on the Strait of Hormuz, Medium-to-Long-Term Focus on Supply Flexibility
From an international economic perspective, the impact of the UAE’s withdrawal from OPEC and OPEC+ on oil prices has a clear time lag. In the short term, oil prices are primarily influenced by the passage through the Strait of Hormuz, regional conflicts, and actual supply disruptions, rather than being directly driven by the UAE’s exit itself. A Reuters survey on 30 April indicated that, due to the ongoing effects of the Iran conflict and expectations of continued disruptions in the energy market, analysts have raised their oil price forecasts for 2026. Thirty-two economists and analysts predict the average Brent crude price will reach $86.38 per barrel in 2026, with the average US WTI price at $80.07 per barrel. The report also noted that Brent crude has risen above $120 per barrel, the highest level in over four years.[4] This suggests that the core variable driving current market pricing is still supply disruptions, rather than potential future production increases. In this environment, the UAE’s withdrawal from OPEC sends a dual signal: on one hand, it weakens the collective institutional ability of oil-producing countries to manage the market; on the other hand, it signals that future supply flexibility may increase. Therefore, in the short term, oil prices may continue to be supported by geopolitical risks, while in the medium to long term, oil prices could benefit from a buffer due to the UAE’s potential production increase.
Regarding global inflation, the impact of this event is not one-dimensional. If the Strait of Hormuz remains restricted, the costs of energy transportation, insurance, and supply uncertainty will drive up the prices of crude oil, refined oil, shipping, and some chemicals, further increasing inflationary pressures on importing economies. If the passage is restored and the UAE increases its exports, it could exert downward pressure on oil prices in the medium to long term, helping to alleviate energy input-driven inflation. In other words, the UAE’s exit from OPEC will not immediately lower oil prices, but it will shift market expectations regarding future supply boundaries.
For major energy-importing economies, this event presents both uncertainty and potential opportunities. Asia is the primary consumer region for Gulf energy, and countries such as China, India, Japan, and South Korea are highly concerned with the stability of Middle Eastern supply. If the UAE can increase its supply to the Asian market without being constrained by OPEC quotas in the future, buyers may gain more long-term contract options and greater flexibility in price negotiations. However, during periods of restricted transportation, any autonomy in production must be subordinated to shipping security. The Strait of Hormuz is one of the world’s most crucial oil chokepoints, with limited alternative transport options. As a result, the economic effects of the UAE’s exit must be assessed alongside the security of maritime trade routes.
For non-OPEC oil producers such as the United States, the UAE’s exit further weakens the traditional oil-producing country alliance’s control over the global crude oil market. OPEC is already under pressure from external supply expansions, as U.S. shale oil, along with emerging oil producers like Brazil and Guyana, continues to release production capacity, reshaping the global supply structure. With the addition of external incremental supply shocks, OPEC’s overall market share continues to shrink. As the UAE exits the mechanism, global oil supply will accelerate toward a multi-center model. Although OPEC still retains significant influence, its past advantages of highly concentrated, unified, and predictable regulation will gradually diminish.
For international financial markets, the key impact of this event lies in energy price fluctuations and sovereign credit assessments. The UAE’s credit status remains stable, with Fitch maintaining its AA- stable rating, and it does not expect the withdrawal to immediately affect its credit metrics.[5] However, for other fiscally vulnerable oil-producing countries, if OPEC’s diminishing constraints lead to a mid-term drop in oil prices, fiscal balance, foreign exchange reserves, and sovereign debt financing costs may be affected. Conversely, for energy-importing countries, if supply flexibility increases in the future, current account and inflation pressures may ease. This effect will not be immediate but will gradually emerge as geopolitical risks subside and production resumes.
Conclusion and Outlook
The UAE’s withdrawal from OPEC and OPEC+ is a significant structural event in the global energy governance system. It is not merely a single country’s dissatisfaction with the organization’s rules, nor is it the beginning of an immediate restructuring of the global oil order. Instead, it is the result of the combined forces of diverging development strategies among oil-producing countries, deteriorating energy passage security, rising non-OPEC supply, and intensifying Gulf economic competition. Its direct impact is limited, but the indirect effects are far-reaching. In the short term, the consequences are constrained by the Strait of Hormuz and regional conflicts, while in the medium to long term, the impact will depend on the UAE’s capacity release, OPEC+ coordination abilities, and the interaction between global demand growth. Given the current situation, the UAE’s withdrawal will not immediately lead to the disintegration of OPEC+ nor drastically alter the global oil price trajectory. However, it has already weakened the institutional integrity of the traditional oil-producing country alliance and has ushered the global energy market into a phase that is more decentralized, more reliant on passage security, and more focused on national production autonomy. For the international economy, the significance of this event lies not in the immediate increase or decrease in oil barrels, but in its indication that global oil governance is further transitioning from the ‘organization quota era’ to an era where “national strategies, transportation security, and market elasticity jointly determine pricing.”
[1] Federal Competitiveness And Statistics Centre – FCSC, “For the First Time in the History of the UAE… Non-Oil Activities Contribute 77.3% of the GDP,” United Arab Emirates Ministry of Cabinet Affairs, September 8, 2026, https://fcsc.gov.ae/press-release/#71660.
[2] “Amid regional conflict, the Strait of Hormuz remains critical oil chokepoint,” U.S. Energy Information Administration, June 16, 2025, https://www.eia.gov/todayinenergy/detail.php?id=65504.
[3] Alex Lawler, Dmitry Zhdannikov, and Ahmad Ghaddar, “Exclusive: OPEC+ likely to agree another oil output hike without UAE, sources say,” Reuters, April 30, 2026, https://www.reuters.com/business/energy/opec-set-agree-another-oil-output-hike-without-uae-sources-say-2026-04-29/.
[4] Anjana Anil, “Prospect of prolonged Iran war disruption drives oil forecasts higher,” Reuters, April 30, 2026, https://www.reuters.com/business/energy/prospect-prolonged-iran-war-disruption-drives-oil-forecasts-higher-2026-04-30/.
[5] Marc Jones, “Rating firm Fitch sees no near-term impact of UAE exit from OPEC,” Reuters, April 30, 2026, https://www.reuters.com/world/middle-east/rating-firm-fitch-sees-no-near-term-impact-uae-exit-opec-2026-04-30/.
