Before 1 May, the once-mighty Organization of the Petroleum Exporting Countries (OPEC) had 12 members, but with the departure of the United Arab Emirates (UAE) at the start of the month, it has 11. These comprise Algeria, the Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, and Venezuela, together accounting for around 33% of the world’s crude oil output, about 46% of its total petroleum traded internationally, and roughly 73% of its proven oil reserves. Back when it was founded in 1960, these figures were respectively 40%, 60%, and 80%. These numbers meant the organisation was well placed to deliver on the specific mandate upon which it was founded, which was to ‘co-ordinate and unify the petroleum policies’ of all its member states. In practical terms, this meant it could effectively fix oil prices, just like a cartel, and held the high geopolitical power associated with that ability. But with its headline numbers reduced and a key producer now gone, how does the future look for OPEC now, and what does it all mean for the global oil market?
Members have left OPEC before — Indonesia in 2016, Qatar in 2019, Ecuador in 2020, and Angola in 2024 — but none of these countries has the same combination of oil and geopolitical significance as the UAE. On the oil side, the federation of seven emirates (with Abu Dhabi being the largest) is OPEC’s third-largest producer after Saudi Arabia and Iraq, pumping around 3.5 million barrels per day (bpd) of crude currently. However, this figure — up until its 1 May departure from the organisation — was constrained by quotas limiting its production to 3-3.5 million bpd. This meant the UAE was also the only OPEC member aside from Saudi Arabia, with significant ‘spare capacity’ that would allow it to pump more if required to ease oil prices. That said, it is highly debatable whether Saudi Arabia has any such capacity, as analysed in my latest book on the new global oil market order, which left the UAE effectively as OPEC’s key ‘swing oil producer’. The Abu Dhabi National Oil Company (ADNOC) has said it is able to boost production to 5 million bpd by 2027, and the curb on the Emirates’ inability to cash in on the extra barrel it can produce is one commercial reason why the exit from OPEC makes perfect sense.
Related: US Senators Push to Reinstate Russian Oil Sanctions
It also does so from a geopolitical perspective. In recent comments, including at the Gulf Influencers Forum hosted by the UAE Government Media Office on 27 April, diplomatic adviser to the UAE president, Anwar Gargash, underlined the failures of the Gulf Cooperation Council (GCC, the political bloc made up of the UAE, Saudi Arabia, Oman, Qatar, Bahrain and Kuwait) during the recent Iranian attacks. “Unfortunately, the GCC’s position is the weakest in history, considering the nature of the attack and the threat it poses to everyone.” He added: “There must be a Gulf vision, policy and representation at the national level, and I hope at the collective level as well. National defence is very important, but we must also say that Gulf solidarity was not up to the task.” He underlined that Iran remains the great strategic threat to Gulf security – not Israel – and that the U.S. is still required in the region. “Today the American role in the region has become more important, not less, because the American role isn’t just about military facilities or anything like that,” he said. “The American role is a defence system. The American role is political support. The American role is economic and financial engagement,” he concluded.
It is little wonder, then, that the news of the UAE’s exit from OPEC was seen as a triumph by U.S. President Donald Trump. “I think it’s great,” he said last week, “and ultimately a good thing for getting the price of gas down, getting oil down, getting everything down…they’re having some problems in OPEC.” As far as Washington is concerned, the diminution of OPEC and the more pro-U.S. stance of one of its principal oil producers is advantageous to it on several levels. To begin with, the UAE was always earmarked by Trump as being the regional foundation stone for his new Middle Eastern foreign policy, centred on the rollout of Washington-brokered relationship deals between Arab states and Israel (the ‘Abraham Accords’), as also detailed in my latest book on the new global oil market order. The UAE, in September 2020, was the first major Gulf state to sign such a deal and, contrary to widely-dispersed rumours, never cut off diplomatic relations with Israel following the events in the aftermath of the 7 October 2023 slaughter of Israeli citizens by the Iranian-backed terrorist organisation Hamas. An additional positive that came with the UAE in Washington’s eyes was that it enjoyed an unusually close relationship with India in the oil and gas sector. This was seen as giving the U.S. additional leverage in using India — perennially short of oil and gas supplies sufficient to power its economic boom — as a political, economic, and military counterbalance to China in the Asia-Pacific region.
As positive as these elements in the UAE’s departure from OPEC are for Washington, perhaps even more so is the destabilising effect it will have on the organisation and its extended structure, ‘OPEC+’. OPEC had already been criticised by Trump for “ripping off the rest of the world” with its cartel-like policies, but ‘OPEC+’ was regarded as an even greater potential threat by Washington. It came into being in late 2016, after the catastrophic failure of OPEC members — led by Saudi Arabia — to destroy the then-nascent U.S. shale oil sector by overproducing to crash prices to levels that would bankrupt these fledgling drillers. What OPEC had not banked on was the remarkable ability of the new shale oil outfits to transform themselves into a lean, mean, low-cost oil-producing machine that could survive the resultant lower oil prices for a lot longer than OPEC members could, as also fully analysed in my latest book on the new global oil market order. Given Saudi Arabia’s and OPEC’s self-induced lack of credibility in the global oil markets at that point, it was obvious that a new element was needed to catalyse a significant, sustained increase in oil prices that would enable OPEC members to gradually repair their budgets. That element was Russia, a long-time rival with the U.S. and Saudi Arabia for the top crude oil producer in the world, but by that point at the end of 2016, firmly occupying the number one spot. At the end of 2016, then, and fully cognisant of the enormous economic and geopolitical possibilities that were available to it by becoming a core participant in the crude oil supply/demand/pricing matrix, Russia agreed to support the OPEC production cut deal in what was to be called from then on ‘OPEC+’. Russia then approached its new role in OPEC+ in its own uniquely self-serving and ruthless fashion, as seen since. However, with the UAE now out of OPEC — and Venezuela likely to follow soon, following the U.S. removal of Nicolás Maduro as President on 3 January — Moscow’s OPEC-associated power is diminishing quickly, along with Saudi Arabia’s.
Although reducing oil prices in the short term may currently be playing second fiddle to Trump’s desire to control key transit routes at China’s expense, an OPEC-free UAE may prove extremely useful in achieving this ambition. New production of 1.5 million bpd by 2027 would go some part to easing oil price pressure over time. And there are plans too by the UAE to build new pipelines from the oil fields in Abu Dhabi to the port of Fujairah, bypassing the Strait of Hormuz, so as to mitigate future transit risks through that channel. Another oil price war instigated by Saudi Arabia can also not be discounted as a possibility, with the aim being to punish the UAE for leaving and to prevent it from making profits on the extra barrels it brings onto the market. The resultant drop in oil prices would be highly beneficial for the U.S. and its allies for three key reasons. First, it would further squeeze Iran’s oil-driven economy, making a peace deal more likely. Second, it would do the same for Russia at a time when its own economy is struggling to fund President Vladimir Putin’s 10-day Special Military Operation (now in its 1,500th+ day). And third, it would bring down gasoline prices in the U.S., perhaps even in time for the November mid-term elections. And, as fully detailed in my latest book, oil prices have enormous direct consequences both for the U.S. economy and for the electoral chances of the parties of sitting presidents.
By Simon Watkins for Oilprice.com