Not by oil alone: the message from the UAE’s exit from OPEC

The United Arab Emirates' decision to pull out from OPEC, a grouping of oil-exporting countries, is significant on three key counts: (1) it signals a broader shifting of alignments in the volatile Persian Gulf and beyond; (2) it reflects the Emiratis' domestic economic priorities; and (3) it underscores an energy strategy in which its economy needs to be sustained not by oil alone.

The UAE's decision appears to be prompted by geopolitical and geoeconomic considerations. On the economic front, the UAE has consistently argued that OPEC quotas capping production, largely dictated by Saudi Arabia, constrain its oil output.

For the past several years, the UAE has sought to be free from OPEC restrictions on oil output to generate revenue from 'black gold', helping diversify its economic base from energy alone to AI infrastructure and renewable energy, given mounting global concerns over the impact of fossil fuels on climate change.

On the geopolitical front, the UAE and Saudi Arabia have divergences over political developments in Yemen and Sudan, where they have supported rival factions. Tensions between the UAE and Saudi Arabia on these issues have been simmering for years.

Secondly, the West Asia war has deepened the divide between the two. Among the Gulf countries, the UAE has possibly been subjected to more Iranian attacks and is reportedly in favour of a more muscular approach towards Tehran. The UAE has also, of late, been favouring closer ties with Israel, clearly placing greater emphasis on national interests than legacy ties.

The UAE's withdrawal from OPEC may not cause significant disruptions to global oil supply. OPEC's share of global crude supply has dropped to 36.7% in 2025, and with the Strait of Hormuz supply route seriously disrupted, the pricing power of 'black gold' has shifted to American producers, at least for the time being.

The UAE's current oil output of nearly 3.5 million barrels per day, and its plan to raise this to five million bpd by next year, could help energy-importing countries. For oil-consuming countries, the immediate threat is less the UAE's exit from OPEC and more the Strait of Hormuz blockade and the fragile Iran–US ceasefire.

In any case, the increase in energy exports by non-OPEC countries over the years has meant that the organisation no longer wields the kind of market power it once had. In recent years, Qatar, Ecuador and Angola have also exited OPEC. More than OPEC output, global concerns are now focused on the Strait of Hormuz and shifting alliances in West Asia.

What is important for oil-consuming countries, particularly in the Global South, is to track shifting alliances in the Gulf and carefully navigate the geopolitical realignments.