UAE exit from OPEC may ease oil prices if output rises — analysts

By Sheldeen Joy Talavera, Reporter

THE UNITED Arab Emirates’ (UAE) exit from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) could benefit oil-importing countries like the Philippines if it leads to higher output and softer prices, analysts said.

Jose M. Layug, a former Energy undersecretary, said the impact would depend on how the UAE adjusts its production outside the group’s quota system.

“If it will produce more supply without following the output limits of OPEC production and offer reduced prices to capture a bigger chunk of the market, then it may be good for the Philippines,” he said in a Viber message.

The UAE on Tuesday said it would leave OPEC and the wider OPEC+ alliance effective May 1, removing one of the group’s biggest producers from coordinated output limits.

Analysts said the move could have mixed effects. Leo P. Bellas, president of Jetti Petroleum, Inc., said the exit could push prices higher in the short term as it removes supply from OPEC’s coordinated pool.

“The UAE’s departure… removed the organization’s third-largest producer from the quota framework,” he said in a Viber message, adding that it comes at a time when global spare capacity remains tight following disruptions in the Strait of Hormuz.

However, the shift could eventually be bearish for prices if the UAE increases production independently, Mr. Bellas said.

“For now, worries about supply constraints… are keeping prices elevated and outweigh concerns on the bearish effects of the UAE’s departure,” he added.

OPEC and its allies will lose some of their power over the oil market when the UAE leaves the group after nearly 60 years as a member, but the rest of the producer alliance is likely to stick together and continue to coordinate on oil supply policy, OPEC+ delegates and analysts said.

That will free Abu Dhabi from the oil production targets imposed by OPEC and its allies to balance supply and demand.

Brigitte Carmel Lim, senior vice-president and chief operating officer at Cebu-based Top Line Business Development Corp., said the development might add volatility rather than immediately affect supply.

“The main question is whether they will increase output independently, which could soften prices, but that’s still uncertain,” she said via Viber.

Global oil prices have surged amid the US-Israel war on Iran, which has disrupted supply flows and heightened inflation risks.

Local pump prices remain tied to global benchmarks. Diesel and kerosene have posted recent rollbacks, while gasoline prices rose slightly this week, reflecting mixed market movements.

The UAE’s exit came as a shock, said five OPEC+ sources who asked not to be named because they are not allowed to speak to the press.

The exit would complicate OPEC+’s efforts to balance the market through adjustments to supply because the group would have control over less of global production, four of the five sources said.

The UAE will become the biggest oil producer to depart OPEC, a heavy blow to the organization and its de facto leader Saudi Arabia. Abu Dhabi pumped about 3.4 million barrels per day (bpd) or about 3% of the world’s crude supply before the US-Israeli war on Iran forced it and other Middle East Gulf producers to curb shipments and shut down some production.

OPEC and the Saudi government communication office did not immediately reply to a request for comment.

Once outside OPEC, the UAE will join the ranks of independent oil producers that pump at will, such as the US and Brazil. For now, there is not much the UAE can do to increase production or exports due to the effective closure of shipping through the Strait of Hormuz. If and when shipping recovers to prewar levels, the UAE could increase output to the country’s capacity of 5 million bpd of crude oil and liquids.

There has been tension between the UAE and Saudi Arabia over the Emiratis’ production quota, which stands at 3.5 million bpd. The UAE has asked for a bigger quota to reflect the fact that it had expanded capacity as part of a $150-billion investment program.

“For years, Abu Dhabi has been looking to monetize its investment in expanding capacity,” said Helima Croft from RBC Capital Markets. The US-Israeli war on Iran would, however, slow those plans down after drones and rockets damaged the UAE’s production facilities, she said.

The war has resulted in the biggest-ever global energy supply disruption in terms of outright daily oil production, according to the International Energy Agency (IEA). The war has also exposed discord among Gulf nations, including between the UAE and Saudi Arabia.

Rumors of the UAE’s exit from OPEC+ have circulated for years amid worsening relations with Riyadh over conflicts in Sudan, Somalia and Yemen. The UAE has also grown increasingly close to the US and Israel.

IRAQ STAYS IN
The UAE is the fourth producer to quit OPEC+ in recent years, and by far the biggest. Angola quit the bloc in 2024, citing disagreements over production levels. Ecuador quit OPEC in 2020 and Qatar in 2019.

Iraq, the third-largest producer in OPEC+ after Saudi Arabia and Russia, has no plan to leave OPEC+ as it wants stable and acceptable oil prices, two Iraqi oil officials said.

OPEC+ will not collapse as Saudi Arabia will still want to manage the market with the help of the group, said Gary Ross, a veteran OPEC watcher and CEO at Black Gold Investors.

“At the end of the day, Saudi Arabia was essentially OPEC — the only country with spare capacity,” he said. Saudi Arabia can produce 12.5 million bpd but has in recent years kept production under 10 million bpd.

OPEC+ membership gives countries more diplomatic and international weight — one of the reasons cited by analysts behind Iran’s decision to stay in OPEC even at the peak of its fight with Gulf countries.

US President Donald J. Trump has accused OPEC of “ripping off the rest of the world” by inflating oil prices. He has said the US might reconsider military support to the Gulf because of OPEC oil policies.

It was, however, Mr. Trump who helped convince OPEC+ to cut output in 2020 during the COVID pandemic as oil prices slumped and US producers suffered.

“The UAE withdrawal marks a significant shift for OPEC… the longer-term implication is a structurally weaker OPEC,” said Jorge Leon, a former OPEC official who now works at Rystad Energy.

OPEC+ members will be more focused on rebuilding facilities hit by the war rather than on embarking on production cuts in the near future, Ms. Croft said. Hence, the broader OPEC+ breakup is not on the cards for now, she added.

DECLINING POWER
OPEC’s sway over the market has been declining for decades.

Formed in 1960, OPEC once controlled over 50% of global output. As rivals’ production grew, the group’s share declined to about 30% of the world’s total oil and oil liquids output of 105 million bpd last year.

The US, which used to rely on imports from OPEC members, has become its biggest rival over the past 15 years. The US has raised production to as much as 20% of the world’s total on the back of its shale oil boom.

The US production spike prompted OPEC to team up in 2016 with several non-OPEC producers to form OPEC+, a group led by Russia — previously one of Saudi Arabia’s top rivals in the oil industry.

The alliance gave the group control over about 50% of the world’s total oil production in 2025, according to the IEA. The loss of the UAE means it will decline to about 45%. — with Reuters