The United Arab Emirates announced it will leave OPEC and the wider OPEC+ alliance, which includes Russia, on May 1. The move strips Saudi Arabia of a key partner and adds to growing uncertainty over the cartel's future.

The UAE has invested heavily to expand its oil industry and grow its market share, but OPEC quotas have repeatedly held it back. Energy Minister Suhail Al Mazrouei told the New York Times: "The world needs more energy. The world needs more resources, and [the] UAE wanted to be unconstrained by any groups."

The UAE currently produces roughly 3.2 to 3.6 million barrels per day (bpd) under quotas but holds spare capacity of nearly 4.8 million bpd. Plans call for a hike in output toward 5 million bpd by next year. Analysts see the move as a calculated step by a producer ready to act independently.

"Losing a member with 4.8 million barrels per day of capacity, and the ambition to produce more, takes a real tool out of the group's [OPEC] hands," said Jorge Leon, head of geopolitical analysis at Rystad Energy. "With demand nearing a peak, the calculation for producers with low-cost barrels is changing fast, and waiting your turn inside a quota system starts to look like leaving money on the table."

The UAE's exit removes one of the few OPEC members with meaningful spare oil capacity, leaving Saudi Arabia unable to easily share the burden of output adjustments. Saudi Arabia needs high oil prices — around $90 per barrel — to fund government spending and its ambitious Vision 2030 projects, including the $500 billion futuristic city NEOM.

David Oxley, chief climate and commodities economist at Capital Economics, called the move "the thin end of the wedge," warning that "the ties binding OPEC members together have loosened." If other producers see the UAE successfully gaining flexibility and market share outside OPEC, they may follow.

In the short term, the exit is unlikely to cause major immediate swings in global oil prices, as the ongoing disruption in the Strait of Hormuz dominates the market. However, in the longer term, the exit points to modestly lower and more volatile oil prices. Brown University expert Jeff Colgan said: "It is possible that we could see the whole organization fall apart."

Source: www.dw.com