The United Arab Emirates announced Tuesday that it will leave OPEC effective May 1 — a shocking blow to the world’s largest oil cartel as the Iran war threatens global energy supplies.

Though the Middle Eastern nation did not give a reason for its exit, some of its oil infrastructure was recently damaged by drone strikes from fellow OPEC member Iran amid the US and Israel’s war with Tehran. 

Energy exports from the UAE – the third-largest oil producer in OPEC behind Saudi Arabia and Iraq – have also been severely disrupted by the on-and-off blockade of the Strait of Hormuz, a vital waterway in the Persian Gulf. That has posed a major threat to the nation’s local economy.

The UAE joined OPEC in 1967, seven years after the organization was created.

But it has been increasingly trying to leverage its own foreign policy in the Middle East, which has contradicted Saudi Arabia at times – especially as Saudi Crown Prince Mohammed bin Salman has begun to directly challenge the Emirates in attracting foreign investments.

Jorge Leon, analyst at Rystad, said Tuesday that the UAE’s withdrawal is a significant shift for the global petroleum group.

“While near-term effects may be muted given ongoing disruptions in the Strait of Hormuz, the longer-term implication is a structurally weaker OPEC,” Leon said.

“Outside the group, the UAE would have both the incentive and the ability to increase production, raising broader questions about the sustainability of Saudi Arabia’s role as the market’s central stabiliser – and pointing to a potentially more volatile oil market as OPEC’s capacity to smooth supply imbalances diminishes.” 

Sergey Vakulenko, a former Gazprom Neft executive, said now “is probably the least damaging time to announce” the exit since oil prices are already high amid the war in Iran.

“After Hormuz reopens, there will be elevated demand as countries will be replenishing reserves that were drawn down since February, ⁠so prices will stay high,” Vakulenko said.

“Without the UAE, OPEC will be much weaker, other major producers, Iran and Iraq, did not maintain any substantial spare capacity. It was mostly done by UAE and Saudi Arabia.”

In a Tuesday statement, the UAE’s Ministry of Energy and Infrastructure said, “We reaffirm our appreciation for the efforts of both OPEC and the OPEC+ alliance and wish them success.

“This decision reflects the UAE’s long-term strategic and economic vision and evolving energy profile, including accelerated investment in domestic energy production, and reinforces its commitment to a responsible, reliable, and forward-looking role in global energy markets,” the statement continued.

“Following its exit, the UAE will continue to act responsibly, bringing additional production to market in a gradual and measured manner, aligned with demand and market conditions.”

With Post wires