United Arab Emirates announced on Tuesday that they are leaving the Organization of the Petroleum Exporting Countries (OPEC), a cartel between some of the main oil-producing countries, founded in 1960 to collectively influence the global oil market, ensuring steady revenues and maximum profit for its members.
However, being part of the group comes at a cost, following some rules and meeting group quota requirements that may limit the ability of some countries to get richer on their own, which is why UAE, which has invested heavily in oil production, has decided to leave the organisation. UAE Energy Minister Suhail Mohamed al-Mazrouei said that the decision was taken after examining the country's energy strategies, and that this decision won't have much immediate market impact because of the already difficult situation at the Strait of Hormuz, via Reuters.
But on the long run, some experts say this could have beneficial consequences for the overall oil availability in the market if, freed from OPEC's constraints and group quotas, UAE increases oil production to be more competitive. According to IEA data, UAE pumped about 2.37 million barrels, but has a sustainable capacity of producing 4.3 million barrels per day (via CNBC).
UAE leaving oil cartel OPEC is a win for Donald Trump, analysts say
This move has also been seen as a victory for Donald Trump, who had criticised the OPEC for "ripping off the rest of the world" with inflated oil prices".
Analysts also believe this could lead to other members with overproduction leaving the group, killing the OPEC, like Kazakhsta, Nigeria, or Venezuela, frustrated because not all members are requited to meet the same quotas, due to their sanctions or conflicts, like Iran, Libya, or Venezuela. The result would be a more volatile market with big price swings.
In 2022, OPEC countries accounted for 38% of global oil production in the world. Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela were the founding members, and were later joined by Algeria, Republic of Congo, Equatorial Guinea, Gabon, Libya, Nigeria, and UAE. Some, like Qatar, Ecuador, and Andola, had already left the group. Other countries, including Russia, Mexico, or Bahrain, joined the OPEC+ broader group.
UAE joined in 1967, but after May 1, when their exit takes place, the OPEC will lose "about 15% of its capacity and one of its most compliant members", according to Saul Kavonic, head of energy research at MST Financial, via BBC. UAE was the fourth biggest oil producer of the OPEC, behind Iran, Iraq, and Saudi Arabia.