UAExit: A deep dive into why the UAE quit OPEC+ and the implications
The fundamental reason for the UAE’s decision to leave OPEC/OPEC+ was that it had been frustrated for years with overly onerous production quotas, which required it to bear a substantially larger share of the burden of balancing the oil market than other OPEC+ members. The surprising thing is not that the UAE left, but why it stayed in for so long. Anyone who has joined one of my webinars since 2022 will know that I have become a bit of a broken record, leading off most presentations with a graph showing how much greater the UAE’s cuts were relative to its peers, and arguing that this was not sustainable and something needed to change quickly. I had expected an exit much sooner, but it held off pulling the trigger for years because of the ups and downs of the oil market, hopes for a fairer reallocation of quotas that were repeatedly dashed, and probably geopolitical considerations.
-The UAE’s exit reflects years of frustration with inequitable OPEC+ quotas.
-Its official capacity is around 4.9m b/d, up from 3.2m when OPEC+ formed in 2016.
-It has withheld around 3-4bn barrels worth $200-300bn since 2017.
-The Hormuz closure provided geopolitical cover and minimized the oil market impact.
-Geopolitics, including strained ties with Saudi Arabia, played more of a supporting role.
-Post-reopening, UAE output could rebound to about 4.5m b/d by year-end.
-In a moderate scenario, oil revenue could grow by 20% y/y in 2026 and 2027.
-OPEC+ may need to realign quotas or risk other departures, such as Kazakhstan and Iraq.
Now read on...
Register to sample a report