Emiratis’ exit from OPEC will boost the flow of oil after the war
The United Arab Emirates' decision to exit OPEC is expected to increase global oil supply once the Strait of Hormuz reopens, reducing the cartel’s influence amid already declining market share. Driven by economic incentives, the UAE aims to maximize production from its high-capacity, low-cost oil reserves rather than adhere to OPEC+ output limits. While the war has temporarily constrained its ability to export more, the UAE’s potential to add over a million barrels per day could pressure prices post-conflict. The move underscores growing divergence between UAE’s volume-focused strategy and Saudi-led efforts to stabilize prices through production discipline.
- ▪The UAE has exited OPEC to pursue higher oil production, motivated by economic interests and frustration with output quotas limiting its potential of 4.85 million barrels per day.
- ▪UAE’s oil production capacity far exceeds its OPEC+ quota of 3.447 million barrels per day, creating a daily opportunity cost of over $100 million when underproducing.
- ▪The closure of the Strait of Hormuz has removed about 13 million barrels per day from the market, pushing oil prices above $110 a barrel in futures and over $140 for immediate delivery.
- ▪With OPEC’s market share dropping to 26% after the UAE’s departure, its ability to influence global oil prices is further weakened, especially as US shale output grows.
- ▪The UAE’s pipeline bypassing the Strait of Hormuz can carry only 1.9 million barrels per day, limiting its ability to fully utilize production capacity until new infrastructure is built.
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