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

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.