(Bloomberg) – The United Arab Emirates will leave OPEC and its wider alliance, OPEC+, dealing a blow to the group and its leader Saudi Arabia as the global oil industry grapples with the massive supply disruption caused by the Iran war.
The UAE’s exit May 1 after six decades of membership is a significant loss for the group, which has spent years balancing global oil markets and defending prices by managing crude supplies.
The move is also the latest indication of how the war in Iran will reshape global energy markets for years to come. While the UAE has talked in the past about quitting OPEC amid longstanding tensions with Saudi Arabia, Energy Minister Suhail Al Mazrouei said in an interview that the disruption caused by the war created an opportune time for the move.
“This is a decision that we took after a very careful and long review of all our strategies,” he said. “The decision is taken at the right time in our view because it’s not going to hugely impact the market: the market is undersupplied.”
The UAE believes that the shortages caused by the war will require agility to respond to market demands without being constrained by the collective decision-making process of the wider group, he said.
The departure also follows years of tension with the leader of the Organization of the Petroleum Exporting Countries and neighboring Saudi Arabia, both over oil output policy and competition for regional political influence.
The two had at clashed occasionally at OPEC+ meetings as the UAE sought to deploy new investments in oil production capacity, while Riyadh pressed the group to restrain supply. Such disagreements had brought Abu Dhabi to the brink of quitting OPEC before, though it never followed through.
In the immediate future though the impact will likely be limited as war between the US and Iran throttles exports from the Persian Gulf—forcing the UAE, the Saudis, Iraq and others to slash production rather than increase it. Oil futures are trading near $111 a barrel in London.
