UAE Announces Exit from OPEC on May 1, Ending Nearly 60 Years of Membership Amid Hormuz Crisis
The United Arab Emirates announced on April 28 that it will formally withdraw from the Organization of the Petroleum Exporting Countries (OPEC) on May 1, ending nearly six decades of membership that began in 1967. The shock deal is seen as a potential death knell for the cartel that coordinates production among the world’s largest oil producers.
Background: Iran Attacks and the Hormuz Crisis
CNBC reported that the announcement comes after the UAE has been the target of missile and drone attacks for weeks by fellow OPEC member Iran. Tehran’s attacks on shipping in the Strait of Hormuz have severely constrained the UAE’s ability to export oil, directly threatening the foundation of its economy. As OPEC’s third-largest producer behind Saudi Arabia and Iraq, the UAE’s departure further shrinks the cartel’s global market share.
Ambitions for Capacity Expansion
UAE Energy Minister Suhail Al Mazrouei told CNBC that the UAE’s exit is aimed at gaining greater freedom of action to pursue its goal of achieving 5 million barrels per day of production capacity by 2027. He explicitly denied that the decision was a response to years of production cuts led by Saudi Arabia.
“This has nothing to do with any of our brothers or friends within the group,” Al Mazrouei said. “We’ve been working together for years and years. We have the highest respect for the Saudis for leading OPEC.”
“Least Disruptive” Timing
Al Mazrouei emphasized that the UAE chose to exit at the “least disruptive” time: “Our exit at this time is the right time for it, because it will have a minimum impact on the price and it will have a minimum impact on our friends at OPEC and OPEC+.”
The UAE Energy Ministry said in a written statement that the country concluded leaving the organization was in its national interest following a comprehensive review of its production policy and capacity. The statement reaffirmed the UAE’s commitment to market stability and its intention to continue cooperating with producers and consumers.
Global Market Reaction
International oil prices fluctuated following the announcement. Analysts suggest the UAE’s departure could trigger a chain reaction, particularly if other producers dissatisfied with OPEC production quotas follow suit. BBC analysis noted that the UAE’s decision could mark the beginning of the end for OPEC as an effective cartel.
The UAE joined OPEC in 1967, just seven years after the organization was founded. Over nearly six decades, the Gulf state played an influential role in OPEC’s decisions, particularly in coordinating production policy among Middle Eastern oil producers.