UAE to Exit OPEC in May as Oil Market Transformed by Iran Conflict

The United Arab Emirates is set to exit Opec and its broader alliance, posing a challenge to the organization and its head, Saudi Arabia, as the global oil sector contends with significant supply disruptions resulting from the Iran conflict.

The UAE’s departure on May 1 follows six decades of membership and represents a considerable loss for the group, which has dedicated years to balancing global oil markets and stabilizing prices through supply management.

This decision also highlights the ongoing transformation of global energy markets due to the Iran war. While the UAE has previously hinted at leaving Opec amid long-standing tensions with Saudi Arabia, Energy Minister Suhail Al Mazrouei mentioned in an interview that the current disruptions from the war present an opportune moment for such a move.

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“This decision comes after thorough and extended review of all our strategies,” he stated. “We believe the timing is appropriate as it won’t significantly impact the market, which is currently undersupplied.”

The UAE is convinced that the shortages resulting from the war necessitate flexibility to meet market demands, unencumbered by the collective decision-making framework of the larger organization, he added.

This exit follows years of friction with the Organization of the Petroleum Exporting Countries’ leadership and neighboring Saudi Arabia, stemming from disagreements over oil output policies and competition for regional political dominance.

In the near term, however, the consequences are likely to be minimal as the conflict between the US and Iran curtails exports from the Persian Gulf, compelling the UAE, Saudi Arabia, Iraq, and others to reduce production instead of increasing it. Currently, oil futures are priced near $111 a barrel in London.

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