Body

The United Arab Emirates said it will leave OPEC on Friday, a decision that could unsettle the group’s influence on world oil prices even though near-term exports remain constrained by the Iran war. In its announcement Tuesday, the UAE said it will depart the cartel this Friday and continue pursuing its “long-held goal of increasing crude production” in “a gradual and measured manner, aligned with demand and market conditions.”

OPEC, formed in September 1960 in Baghdad by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, is a 12-member alliance that also includes the UAE. The group, headquartered in Vienna, coordinates production changes among its members with the aim of regulating oil prices through collective decisions on when to increase or decrease output.

The cartel’s stated rationale has centered on balancing prices so member governments can manage budgets and benefit from their natural resources, while avoiding levels so high that importing countries face demand destruction. The approach has drawn pressure at times in the United States, where gasoline prices are politically sensitive; both Donald Trump and Joe Biden have criticized OPEC in the past for allegedly keeping prices high.

OPEC’s role in the global oil market has grown since the cartel’s creation, when control over production shifted toward countries holding the reserves rather than Western companies dominating the market. At other moments, OPEC-linked supply moves have rippled beyond oil, including the 1973 embargo by Arab members that contributed to a quadrupling in oil prices during the Yom Kippur War.

Analysts said the UAE’s planned withdrawal removes a lever that OPEC can use to adjust output quickly. Jorge Leon, head of geopolitical analysis at Rystad Energy, said the UAE’s exit “removes one of OPEC’s few members with the ability to quickly increase production,” and he warned that a “structurally weaker OPEC” with less spare capacity concentrated inside the group could find it harder to calibrate supply to stabilize prices.

Leon said the “net effect points to a more fragmented supply landscape and a potentially more volatile oil market over time” as OPEC’s ability to smooth imbalances diminishes. The UAE’s move also reflects longstanding friction within the alliance, including with Saudi Arabia, the biggest OPEC producer and de facto leader.

For the short term, the impact of the UAE’s decision depends less on OPEC membership and more on whether Persian Gulf oil can physically reach customers. Iran is blocking the Strait of Hormuz, the passage for tankers carrying a fifth of the world’s oil and gas supplies, preventing much of the oil produced by Persian Gulf countries such as Saudi Arabia and the UAE from being exported.

That constraint has been a central driver of oil prices rising sharply in the immediate period, even as the UAE prepares to leave OPEC. Michael Brown, a research strategist at Pepperstone foreign exchange brokerage, said “all that really matters is whether the Strait of Hormuz is open or closed,” adding that, “at present, it’s essentially shut,” tightening supply conditions day by day.

Brown said the situation likely means oil-market benchmarks will continue “to grind higher on a daily basis” as long as the strait remains closed. He said if the UAE is able to increase production after the conflict, that could help speed a return toward oil prices more in line with levels seen before the war.

AI-generated disclosure and CC0 license notice are provided by the platform footer.