UAE announces it will leave Opec

The world’s seventh-largest oil producer will exit the bloc on May 1, allowing it to gain greater ‘flexibility to respond to market dynamics’

The UAE has announced it will withdraw from Opec after more than five decades.

The decision will take effect on May 1.

The statement was delivered as Opec prepared to meet in Vienna on Wednesday. It will also leave the broader Opec+.

“This decision follows a comprehensive review of the UAE’s production policy and its current and future capacity and is based on our national interest and our commitment to contributing effectively to meeting the market’s pressing needs,” UAE state news agency Wam said.

“While near-term volatility, including disruptions in the Arabian Gulf and the Strait of Hormuz, continues to affect supply dynamics, underlying trends point to sustained growth in global energy demand over the medium to long term.”

Wam said the decision “reflects a policy-driven evolution in the UAE’s approach, enhancing flexibility to respond to market dynamics while continuing to contribute to stability in a measured and responsible manner”.

The move comes amid a major diversification drive by the UAE, where the non-oil economy now accounts for roughly 75 per cent of GDP. 

However, the country has stated its desire to increase production from 3.4 million barrels per day to five million by 2027.

“We reaffirm our appreciation for the efforts of both OPEC and the OPEC+ alliance and wish them success,” Wam’s statement said.

“During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all. However, the time has come to focus our efforts on what our national interest dictates and our commitment to our investors, customers, partners and global energy markets. This is what we will focus on going forward.”

Impact of war on oil

The Iran war wiped out 7.88 million barrels per day of Opec’s production in March, resulting in the biggest supply collapse for the producers’ group in recent decades. Opec production fell 27 per cent to 20.79 million bpd in March. 

The supply shock surpassed Opec’s cutting back of 6.28 million bpd recorded in May 2020, after the Covid-19 pandemic hit global oil demand. It also exceeds the drop in production from the 1970s oil crisis and the 1991 Gulf War. 

Founding member’s departure

The UAE is a founding member of Opec, having joined the exporters’ group in 1967, four years before the founding of the nation. The UAE, in coalition with other key Gulf producers – Saudi Arabia and Kuwait, was an instrumental actor in the supply of oil from the Middle East, which accounts for 30 per cent of the world’s production. 

The UAE’s exit also follows that of Qatar, which left in 2019, saying that its position as a leading gas producer made its membership of the group irrelevant. Two other Gulf countries – Bahrain and Oman – remain outside of Opec but are aligned with the group’s supply management efforts.