The United Arab Emirates (UAE) has announced a surprise decision to leave OPEC/OPEC+ starting 1 May, according to MUFG’s Michael Wan. This move is attributed to the UAE's dissatisfaction with OPEC production quotas and its significant spare production capacity, which could allow the country to increase oil output from around 3 million barrels per day (mb/day) to potentially 5 mb/day after the current crisis ends [1].
MUFG notes that while internal discussions about leaving OPEC have occurred within the UAE for some time, the timing of the announcement—amid ongoing conflict in the region—and the manner in which it was made were unexpected. The decision is also linked to broader disagreements with Saudi Arabia on various issues [1].
The bank highlights that the immediate market impact is expected to be minimal. However, over the longer term, the UAE's departure could undermine OPEC's ability to maintain a price floor for oil. If other members follow the UAE's lead, this could further erode the effectiveness of OPEC/OPEC+, potentially biasing oil prices lower over time [1].
MUFG warns that the key question now is whether other OPEC/OPEC+ members might also consider leaving, which would further weaken the group's influence on global oil markets [1].
CONCLUSION
The UAE's exit from OPEC/OPEC+ is seen as a bearish signal for oil prices in the longer term, according to MUFG. While near-term market effects are expected to be limited, the move raises concerns about OPEC's future cohesion and its ability to support oil prices.