04/05/26
UAE calls time on Opec to chart its own path
The UAE exit comes on the heels of the Iran war, but Abu Dhabi's decision
reflects long-standing differences with Riyadh and within Opec, write Bachar
Halabi, Nader Itayim and Aydin Calik Dubai, 4 May (Argus) — The UAE's decision
to withdraw from Opec and the wider Opec+ alliance from 1 May does not change
current global oil market dynamics, of which the main driver is the crisis
sparked by the US-Israel war against Iran. But Abu Dhabi's move raises questions
over the future of the producer alliance and relations among Mideast Gulf
oil-producing countries. The decision follows a review of the country's
production strategy and capacity outlook, with the UAE citing national interest
and a need to respond more effectively to global oil demand. Crude flows through
the strait of Hormuz have remained constrained for around eight weeks, with
exports from Mideast Gulf countries already limited mostly by security
considerations. This has turned market dynamics on its head, with the issue
today becoming not how much oil producers are willing to supply, but how much
they can physically deliver, at what cost and with what degree of reliability.
Price volatility is at its highest in years, as the current global energy shock
comes on the heels of the Russia-Ukraine war and the economic disruption caused
by the Covid-19 pandemic earlier in the decade. The UAE's exit does not
materially alter near-term balances, especially since a resolution for safe
passage through Hormuz remains elusive as the US and Iran have been unable to
reach a political agreement that ends hostilities. But it does reshape the terms
under which that balance will be managed once current disruptions ease. Oil
markets have, for the better part of the past two decades, operated under a
relatively clear framework whereby Opec, and now Opec+, would manage supply to
stabilise markets and support global economic growth, adjusting output through
co-ordinated quotas in response to demand cycles. The group also acted as a
shock absorber during disruptions, relying on spare capacity — primarily held by
Saudi Arabia — to smooth volatility. That system is becoming harder to sustain.
Rising output from non-Opec producers, the proliferation of sanctions regimes
and the expansion of shadow fleets have diluted the effectiveness of
co-ordinated supply management. At the same time, geopolitical disruptions are
becoming more frequent and less predictable, reducing the market visibility on
which quota systems depend. Capacity builder Abu Dhabi has expanded crude
production capacity steadily in recent years. The UAE says it is capable of
producing 4.85mn b/d this year and has set a target of 5mn b/d by 2027, with
plans to go even higher thereafter, with state-owned Adnoc approving a $150bn
capital expenditure plan for 2026–30 to accelerate growth in oil, gas and
chemicals. At the same time, the UAE has viewed itself as one of the most
constrained members of Opec+ in relative terms. That imbalance has been
partially addressed in recent years through successive upward revisions to its
baseline under Opec+ agreements. This year, Opec+ also agreed the independent
maximum sustainable capacity (MSC) assessment process, which is designed to
recalibrate production baselines for 2027 onwards. But the UAE's decision
appears less about securing higher quotas and more about securing flexibility.
Adnoc chief executive Sultan al-Jaber described the exit as a "sovereign
decision" aligned with the country's long-term energy strategy, production
capacity and national interest, while maintaining a focus on global market
stability. The company's approach remains centred on meeting global energy
demand "with reliability and responsibility", he said, adding that partnerships
and credibility would continue to underpin its positioning. Behind that language
is a shift toward greater control. With capacity continuing to grow, the UAE is
seeking the ability to respond to market conditions without being bound by
negotiated output ceilings, a move that reflects both commercial logic and a
broader recalibration of its regional positioning. The decision is not intended
to signal a break with the market, nor to trigger an immediate supply response,
according to UAE sources, who note that "there is no plan to flood the market".
The implications for Opec+ are less immediate but more structural. The alliance
remains intact, and Saudi Arabia will continue to anchor it, with the capacity
and willingness to manage supply. But the UAE's exit introduces a new variable.
Riyadh may want to look to reinforce its role as the system's primary
stabiliser. This could revive discussions around Saudi Arabia's previously
shelved plans to expand production capacity back towards 13mn b/d — a level that
would further consolidate its position as the world's swing producer. Saudi
officials have never fully abandoned those ambitions, Argus understands.
Meanwhile, Russia remains committed to the alliance , particularly as sanctions
linked to the Ukraine war continue to limit its flexibility. "We still believe
in Opec+ as a structure that helps balance the global energy markets," the
Kremlin said. "We hope that the structure will continue its work, and we will
continue our contacts within this structure with our partners." The move also
highlights a subtle but important divergence within the Gulf Co-operation
Council. Tensions between the UAE and Saudi Arabia had been building even before
the Iran war, particularly around regional strategies and differing views on
Yemen, Sudan and relations with Israel. The conflict has accelerated that
divergence, prompting a broader reassessment of alliances and strategic
priorities. The UAE said it has moved to deepen ties with partners it sees as
critical to its economic and security interests, including the US and Israel, as
well as countries such as South Korea, France and Japan, which have played a
role in supporting regional stability during the conflict. Saudi Arabia, by
contrast, has adopted a more cautious diplomatic posture. It has pursued
de-escalation with Iran despite direct attacks and has strengthened its regional
security architecture, including a military defence agreement with Pakistan. The
divergence is not limited to energy policy. The UAE is also considering
suspending its membership in the Arab League and withdrawing from the
Organisation of Islamic Cooperation, sources told Argus, moves that would
further underline a shift towards a more independent, yet risky, foreign policy
posture. For now, the implications of the UAE's exit will depend largely on how
the Iran conflict evolves and on the trajectory of its relationship with Riyadh.
The experience of Qatar's regional isolation in 2017 remains a reference point,
underscoring how quickly intra-Gulf dynamics can shift. Canary in the oil field
Over the longer term, the more significant question is whether this marks the
beginning of a broader shift in producers' behaviour. As markets become more
volatile and less predictable, the appeal of flexibility is increasing.
Producers with spare capacity may increasingly prioritise optionality over
co-ordination, particularly when geopolitical risks disrupt traditional supply
frameworks. This raises further questions for the composition of Opec+ itself.
Venezuela's position within the group remains uncertain because of its evolving
relationship with Washington. Iran's future role within the group could also
come into focus if it reaches a political agreement with the US and fully
reintegrates into global oil markets. In that sense, the UAE's departure may not
be an isolated event, but an early signal of a more fragmented and fluid phase
for producer co-ordination. Opec+ crude production mn b/d Mar Feb* Mar target ±
target Opec 9 14.71 24.30 23.36 -8.65 Non-Opec 9 13.13 12.38 13.37 -0.24 Opec 18
27.84 36.68 36.74 -8.90 Total Opec+ 33.15 42.41 na na *revised †includes extra
cuts agreed in Apr 23 Opec wellhead production mn b/d Mar Feb* Mar target ±
target Saudi Arabia 7.00 10.88 10.10 -3.10 Iraq 1.70 4.23 4.27 -2.57 Kuwait 1.17
2.59 2.58 -1.41 UAE 1.90 3.53 3.41 -1.51 Algeria 0.98 0.98 0.97 0.01 Nigeria
1.45 1.55 1.50 -0.05 Congo (Brazzaville) 0.26 0.28 0.28 -0.02 Gabon 0.21 0.21
0.18 0.03 Equatorial Guinea 0.04 0.05 0.07 -0.03 Opec 9 14.71 24.30 23.36 -8.65
Iran 3.08 3.50 na na Libya 1.23 1.29 na na Venezuela 1.00 0.94 na na Total Opec
12‡ 20.02 30.03 na na †includes extra cuts agreed in Apr 23 ‡Iran, Libya and
Venezuela are exempt from production targets Non-Opec crude production mn b/d
Mar Feb* Mar target ± target Russia 9.32 9.00 9.57 -0.25 Oman 0.80 0.80 0.81
-0.01 Azerbaijan 0.46 0.46 0.55 -0.09 Kazakhstan 1.92 1.44 1.57 0.35 Malaysia
0.35 0.35 0.40 -0.05 Bahrain 0.03 0.08 0.20 -0.17 Brunei 0.09 0.09 0.08 0.01
Sudan 0.01 0.01 0.06 -0.05 South Sudan 0.15 0.15 0.12 0.03 Total non-Opec 13.13
12.38 13.37 -0.24 *revised †includes extra cuts agreed in Apr 23 Send comments
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