However, for OPEC followers, it was just a question of time. The UAE has been threatening to leave OPEC for some years. The UAE was reportedly unhappy with its production quota.
Timing
The timing of its leaving OPEC is perfect. It showed that the UAE did not want to hurt the members causing a sudden price drop. Due to the blockade of Strait of Hormuz by Iran and naval blockade of Iranian ports by the USA, the UAE’s exit did not even create a ripple in the oil market.
When the Strait of Hormuz is free for shipping without any restriction and the Gulf oil production comes to normality, it will be a new game for the OPEC and also for ten countries led by Russia which are part of so-called OPEC plus.
Different reaction
There have been vastly different reactions to the UAE exit. At one end, some analysts have stated that the much anticipated death of the OPEC cartel will happen now. We have heard of such warnings before.
At the other end, there are some pundits who are predicting that OPEC will manage the crisis to survive as it did in the past. It is useful to recall the 1986 crisis when oil prices fell from USD 27 per barrel to single digit.
Saudi Arabia abandoned its role as a swing producer and tried to maximize its market share by selling crude oil at netback price to ensure guaranteed margin to refiners.
Similar crisis
OPEC faced a similar crisis in 2020 when there was negative price, though for a very short time. This was caused, as in 1986, to gain market share. Only the players were different. They were Russia and Saudi Arabia. Crisis was precipitated by massive collapse in demand because of Covid-19 pandemic which was made worse by attempts to get bigger market share.
Not a serious problem
According to the International Energy Agency, total sustainable production capacity of OPEC+ is 40.4 million barrels per day. Before the closure of Strait of Hormuz, total production in February 2026 was 36.1 mmbd.
OPEC+ had succeeded in giving price support by imposing production quota. However, production discipline was maintained only by a few out of 22 countries – Saudi Arabia (1.71 mmbd), Russia (0.73), the UAE ( 0.64), Kuwait (0.34) and Iraq ( 0. 30).
The UAE has the fourth largest sustainable production capacity of 4.3 mmbd after Saudi Arabia, Russia and Iraq. It contributed 15 per cent of oil production cuts to balance supply/demand while that of Saudi Arabia was 40 per cent.
After exiting OPEC, the UAE is likely to produce at its maximum. Then OPEC+ has to reduce an additional 0.7 mmbd to balance supply/demand. This cannot be an insurmountable target for OPEC+. Â This is manageable If the alternative is a large drop in oil price which cannot be compensated by higher production.
As illustrated above, the exit of the UAE need not pose a serious problem if there is a will on the part of most members to balance supply and demand by imposing production discipline.
Let us assume that every member, including the big ones like Saudi Arabia, Russia, Iraq and Kuwait, wants to maximize production. Â Under such conditions, the price will be decided by the free market.
But it is unlikely to fall below USD 40-50 per barrel. It will not be a repetition of the 1986 type of scenario.
Since the incremental barrel setting the market price will be shale oil in the USA, they will support a relatively higher price even in the absence of OPEC.
Average marginal cost of new shale oil wells is  around USD 61-70 and for old shale oil wells it is USD 26-45 per barrel.
It is ironic that it is the USA which ends up supporting a higher oil price and not OPEC which has a lower marginal cost of production.
Reason for exit
With a two trillion sovereign fund for a population of around 1.2 million Emiratis (rest 10 millions are guest workers), there is no compelling argument for the UAE to exit because of a lower production quota.
There must be some other reason. It is claimed that the UAE wants to monetize its crude oil resources before the oil era comes to an end and does not worry about the price.
On the other hand, Saudi Arabia wants to maximize revenues by controlling production. It is here that the UAE and Saudi Arabia seem to have different preferences. There are reports that the UAE felt that during the recent Iran war, it faced the maximum missile and drone attack and other Gulf countries, specially Saudi Arabia, were not taking a more aggressive stance against Iran.
Also in Yemen, where there is a civil war, the UAE and Saudi Arabia are on different sides.
The UAE was trying to ensure safe shipping routes in the Red Sea by supporting the Southern Transitional Council – strategically wise move. Again in Sudan’s brutal civil war, the UAE is supporting an armed insurgency which is opposed by Saudi Arabia to support the government.
OPEC’s history
OPEC came into existence in 1960 to gain control of the oil industry from the so-called Seven Sisters ( Exxon, Mobil, Gulf, Texaco, Chevron, BP and Shell) to secure the ‘right and legitimate’ price for their oil resources.
Founders were Saudi Arabia, Venezuela, Iran, Iraq and Kuwait.
In 2018, OPEC had 15 members – the largest number ever. Currently, it is 12.
Over the years, members of OPEC had suspended, terminated, left and rejoined for various reasons. Qatar left in 2019, Ecuador in 2020 and Angola in 2024. Gabon left in 1995 and rejoined in 2016. Indonesia was suspended in 2016.
It is more than likely that the UAE which has been an active member since 1967 may rejoin OPEC in the future with more favorable changes in geo-political environment. This is, however, no more certain than what an astrologer may predict.
(The author has over 50 years of experience in international oil industry and served as a member on the Exploration Advisory Committee to ONGC)