The UAE will exit OPEC after about 60 years

The United Arab Emirates has It announced it would withdraw from OPEC and OPEC+ effective May 1, ending membership that began in 1967 — four years before the UAE established itself as a country. This indicates a turning point in the UAE’s role in… Global energy.

Government statement published by the official news agency WhamHe pointed to a comprehensive review of the country’s production policy and production capacity as the basis for the move, describing it as a reflection of the UAE’s “long-term strategic and economic vision and its evolving energy profile.”

She said that the decision is rooted in the national interest and commitment to meeting what she described as the “urgent needs” of the market, in reference to global demand that the UAE believes is not sufficiently met at a time when it is suffering from major supply disruptions.

The statement acknowledged the geopolitical backdrop, including the ongoing conflict with Iran that has severely restricted tanker movements across the sea Strait of HormuzIt is the narrow waterway between Iran and Oman, through which it passes approximately One-fifth of the world’s production of crude oil and liquefied natural gas It usually passes.

The EIA estimates that Iraq, Saudi Arabia, Kuwait, the United Arab Emirates, Qatar and Bahrain shut in 7.5 million barrels per day of crude oil production in March, and 9.1 million barrels per day in April.

However, the statement described the exit as policy-driven rather than reactionary, noting that “underlying trends point to sustained growth in global energy demand over the medium to long term.”

Long-standing dispute

Tuesday’s announcement was not without precedent. In 2021, The UAE refused To back the production deal to extend cuts to production unless its individual quota was increased, arguing that it had invested billions to expand capacity and was unfairly constrained by the numbers set in 2018. A compromise was eventually reached, but the incident revealed a fundamental tension: the UAE wanted to produce more, and OPEC’s quota system was holding it back.

This ambition has grown since then. It is owned by the state oil company ADNOC The declared goal is 5 million barrels per day by 2027up from current production of about 3.4 million. Under the OPEC+ deal, the country retained nearly 3.2 million barrels per day while its production capacity was more than 4 million, a gap that made it increasingly difficult to justify continued membership.

United Arab Emirates He stressed that its exit does not indicate a retreat from global energy responsibility. It pledged to bring additional production to market “in a gradual and measured manner, in line with demand and market conditions,” and reaffirmed investment plans in oil and gas, renewable energy and low-carbon technologies.

The statement indicated that OPEC’s departure would make the country more flexible to respond to market dynamics. OPEC sets production limits, which means the world’s major producers can often supply and sell larger quantities of oil than they already do.

By limiting supply, the group can support prices. This mechanism primarily benefits producers that rely heavily on oil revenues, a description that fits Saudi Arabia much better than the United Arab Emirates, whose non-oil economy now represents nearly 20% of GDP. 75 percent of GDP.

Market reaction and broader implications

The immediate market response was sharp. Brent crude surpassed the European index $100 per barrel For the first time since April 8, it has risen to $111 as of writing.

The longer-term repercussions for OPEC are more important. The group has been under pressure for months, with several members – including Iraq, Kazakhstan and the UAE itself – overproducing their quotas and becoming unable to survive. required for compensation. The UAE’s departure deprives the group of its third largest producer at a time when supply dynamics are already fragile.

The exit follows Qatar’s exit from the group in 2019, and comes as OPEC prepares for a meeting in Vienna on Wednesday.

“It is time to focus our efforts on what is dictated by our national interest and our commitment to our investors, customers, partners and global energy markets,” the statement read.

The UAE said that it appreciates more than five decades of cooperation within OPEC, and wishes the organization success in the future.

This story originally appeared on Wired Middle East.