The United Arab Emirates will withdraw from the OPEC and OPEC+ oil cartels to focus on "national interests", it has announced, causing fresh shockwaves as energy prices soar over the Middle East war.
The UAE, one of the world's top oil producers, which has previously chafed at OPEC production quotas, will pull out on Friday, a statement carried by the official WAM news agency said on Tuesday.
"This decision reflects the UAE's long-term strategic and economic vision and evolving energy profile," the UAE statement said.
"During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all," it added.
"However, the time has come to focus our efforts on what our national interest dictates."
Weakening OPEC?
The UAE has been an OPEC member through the emirate of Abu Dhabi since 1967, four years before the former British protectorate became a country.
The decision, in the midst of the biggest oil shock since the 1970s, is likely to weaken OPEC, dominated by the UAE's neighbour Saudi Arabia, indicating further turbulence for markets, analysts said.
Gulf oil shipments are currently being strangled by Iran's blockade of the Strait of Hormuz, which flows past the UAE and normally carries one-fifth of the world's oil.
The UAE, hard-hit by Iranian attacks, has also faced trouble in its relationship with Saudi Arabia, the world's top oil exporter, after a stand-off between rival forces backed by the two countries in Yemen.
Iran has offered to end its chokehold on the Strait of Hormuz if the US lifts its blockade on the country and ends the war in a proposal that would postpone discussions on Tehran’s nuclear programme, two regional officials said on Monday.
US President Donald Trump seems unlikely to accept the offer, and US Secretary of State Marco Rubio appeared to rule out any deal that excludes Iran’s nuclear programme.
'More volatile oil market'
Meanwhile, another climb in oil prices because of the Iran war is helping to halt Wall Street’s record-setting rally.
The price for a barrel of Brent crude oil to be delivered in June climbed 2.7 percent to $111.18. Brent to be delivered in July, which is where traders are focusing more in the oil market, rose 2.6 percent to $104.33 on Tuesday.
After sitting around $70 in late February, Brent prices are moving closer to their peak of $119, reached when worries about the war were at their heights.
Pre-war, the UAE was the fourth biggest producer in the 22-member OPEC+, behind Saudi Arabia, Russia and Iraq.
Jorge Leon, an analyst at Rystad Energy, said its withdrawal may not immediately impact oil markets while Hormuz shipments remain on hold.
But the UAE will now be free to raise 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".
Jamie Ingram, managing editor for the Middle East Economic Survey, posted that OPEC is losing 13 percent of its production capacity with the UAE's departure, citing the International Energy Agency.
Control over the market
Founded in 1960, the 12-member OPEC cartel in 2016 partnered up with 10 other producers to form OPEC+ to gain more clout.
The Vienna-based group drew international attention in 1973, when it imposed an oil embargo against Israel's allies in the midst of the Yom Kippur War, triggering the first oil crisis.
Within just a few months, prices quadrupled, highlighting the cartel's dominance.
Faced with rising competitors in the 1980s, it introduced the famous quota system that enabled it to exert more control over the market.
This strategy meant the group fared relatively well during the 2008 financial crisis and the price shock in the wake of the Covid-19 pandemic, despite increased internal tensions.
