United Arab Emirates says it will leave OPEC in a blow to the oil cartel

The Unit­ed Arab Emi­rates said Tues­day it will leave OPEC ef­fec­tive May 1, strip­ping the oil car­tel of one of its largest pro­duc­ers and fur­ther weak­en­ing its lever­age over glob­al oil sup­plies and prices.

The UAE’s de­ci­sion had been ru­moured as a pos­si­bil­i­ty for some time, as it pushed back in re­cent years against OPEC pro­duc­tion quo­tas it felt had been too low — mean­ing it wasn’t able to sell as much oil to the world as it had want­ed.

“Hav­ing in­vest­ed heav­i­ly in ex­pand­ing en­er­gy pro­duc­tion ca­pac­i­ty in re­cent years, the big­ger pic­ture is that the UAE has been itch­ing to pump more oil,” Cap­i­tal Eco­nom­ics wrote in an analy­sis. “The ties bind­ing OPEC mem­bers to­geth­er have loos­ened,” it said, par­tic­u­lar­ly af­ter Qatar with­drew from the car­tel in 2019.

Re­gion­al pol­i­tics are al­so like­ly at play. The UAE has had in­creas­ing­ly frosty re­la­tions with Sau­di Ara­bia, OPEC’s largest pro­duc­er, over po­lit­i­cal and eco­nom­ic mat­ters in the Mideast, even af­ter both came un­der at­tack by fel­low OPEC mem­ber Iran dur­ing the war.

No im­me­di­ate im­pact like­ly for world oil mar­kets

The UAE’s with­draw­al from OPEC won’t nec­es­sar­i­ly have any im­me­di­ate ef­fects in mar­kets. That’s be­cause world oil sup­plies are sharply con­strained by the war in Iran, which has closed off the Strait of Hor­muz, a wa­ter­way through which one-fifth of glob­al oil sup­plies — in­clud­ing much of the UAE’s — is trans­port­ed. On Tues­day, Brent crude, the in­ter­na­tion­al bench­mark, trad­ed above $111 a bar­rel, or more than 50% above its pre­war price.

OPEC’s mar­ket pow­er had al­ready been wan­ing in re­cent years as the Unit­ed States ramped up its pro­duc­tion of crude oil. Sau­di Ara­bia had been pump­ing over 10 mil­lion bar­rels of oil a day be­fore the war. The U.S. pumps more than 13 mil­lion bar­rels a day.

U.S. Pres­i­dent Don­ald Trump has been a steady crit­ic of the car­tel dur­ing his two terms in the White House.

The UAE, which joined OPEC through its emi­rate of Abu Dhabi in 1967, had been pro­duc­ing around 3.4 mil­lion bar­rels of crude a day just be­fore the U.S.-Is­raeli war with Iran be­gan on Feb. 28. An­a­lysts say it has ca­pac­i­ty to pro­duce rough­ly 5 mil­lion bar­rels a day.

In its an­nounce­ment on Tues­day, made via its state-run WAM news agency, the UAE said it al­so would leave the wider OPEC+ group, which Rus­sia had led to try to sta­bi­lize oil prices.

“This de­ci­sion re­flects the UAE’s long-term strate­gic and eco­nom­ic vi­sion and evolv­ing en­er­gy pro­file, in­clud­ing ac­cel­er­at­ed in­vest­ment in do­mes­tic en­er­gy pro­duc­tion,” the UAE said, adding that it would bring “ad­di­tion­al pro­duc­tion to mar­ket in a grad­ual and mea­sured man­ner, aligned with de­mand and mar­ket con­di­tions.”

The UAE’s with­draw­al re­moves one of OPEC’s few mem­bers with the abil­i­ty to quick­ly in­crease pro­duc­tion, said Jorge Leon, head of geopo­lit­i­cal analy­sis at Rys­tad En­er­gy.

“A struc­tural­ly weak­er OPEC, with less spare ca­pac­i­ty con­cen­trat­ed with­in the group, will find it in­creas­ing­ly dif­fi­cult to cal­i­brate sup­ply and sta­bi­lize prices,” he said.

Sau­di Ara­bia, UAE in­creas­ing­ly at odds

Sau­di Ara­bia and the UAE in­creas­ing­ly have com­pet­ed over eco­nom­ic is­sues and re­gion­al pol­i­tics, par­tic­u­lar­ly in the Red Sea area. The two coun­tries had joint­ly fought against Yemen’s Iran-backed Houthi rebels in 2015. How­ev­er, that coali­tion broke down in­to re­crim­i­na­tions in late De­cem­ber, when Sau­di Ara­bia bombed what it de­scribed as a weapons ship­ment bound for Yemeni sep­a­ratists backed by the UAE.

As ten­sions rose in re­cent months, Sau­di broad­cast­ers long based in Dubai, the eco­nom­ic hub of the UAE, have pulled back to the king­dom.

“This ex­it of OPEC fits in­to the UAE need for flex­i­bil­i­ty with key en­er­gy con­sumers as well -- in­clud­ing a fu­ture re­la­tion­ship with Chi­na and a more com­pet­i­tive re­la­tion­ship with Sau­di Ara­bia,” said Karen Young, a se­nior re­search schol­ar at Co­lum­bia Uni­ver­si­ty’s Cen­ter on Glob­al En­er­gy Pol­i­cy.

The UAE host­ed the Unit­ed Na­tions COP28 cli­mate talks in 2023, a con­fer­ence that end­ed for the first time with a pledge by near­ly 200 coun­tries to move away from plan­et-warm­ing fos­sil fu­els. But the UAE still plans to in­crease its pro­duc­tion ca­pac­i­ty in the com­ing years, even as it pur­sues more clean en­er­gy at home, a move de­cried by cli­mate ac­tivists.

“The de­mand for pow­er is go­ing to go up and up and up,” U.S. In­te­ri­or Sec­re­tary Doug Bur­gum told an Abu Dhabi oil con­fer­ence in No­vem­ber. “To­day’s the day to an­nounce that there is no en­er­gy tran­si­tion. There is on­ly en­er­gy ad­di­tion.”

He drew wide­spread ap­plause from his Emi­rati hosts. —DUBAI, Unit­ed Arab Emi­rates (AP)

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Sto­ry by JON GAM­BRELL | As­so­ci­at­ed Press

As­so­ci­at­ed Press writer David McHugh in Frank­furt, Ger­many, con­tributed to this re­port.