On April 28, the United Arab Emirates (UAE) said it was quitting the Organization of the Petroleum Exporting Countries (OPEC), sending shockwaves across the international oil market that has already been feeling the pressure of the West Asia war as well as the blocking of the Strait of Hormuz, through which a fifth of global energy supplies passes.
In a statement, UAE, the third largest oil producer in OPEC (3.12 million barrels per day), said the decision reflected its “long-term strategic and economic vision and evolving energy profile”. It cited the need for greater flexibility to invest in domestic energy production and respond independently to market conditions amidst immediate volatility.
This means the UAE believes that by leaving the cartel, it will be able to set its own levels of oil production and not be bound by the collective decision of OPEC, which has been facing criticism for setting artificial limits on oil production in a bid to hike prices.
But there could be more to it than just economics. Energy market observers had seen this coming, owing to the widening gulf between Saudi Arabia, the largest oil producer in OPEC (9.48 mbpd), and the UAE. The two nations reportedly have conflicting interests in Yemen and Sudan as well as in northern Africa.
The UAE’s ties with other countries in the Gulf Cooperation Council (GCC) got strained as it came under heavy bombing by Iran in the ongoing conflict. In the first 40 days of the war, Iran launched some 2,800 missiles and drones at the UAE, targeting its oil-gas sites as well as a few civilian targets. There was mounting frustration in the UAE over Gulf countries’ response to the attacks.
Indeed OPEC has been the biggest influencer of oil prices for decades, and that is bound to continue unless more countries leave the cartel. The group was made up of 13 countries: Algeria, Angola, Republic of Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, UAE and Venezuela. Together they controlled 40 per cent of the world’s oil supply. The UAE officially entered OPEC in 1967.
Nearly 80 per cent of the world’s proven oil reserves too were located in OPEC member countries, with the bulk of OPEC oil reserves (64.5 per cent) in the Middle East. Given its huge influence over oil production and supply, OPEC, founded in 1960, has a major command over the pricing of oil. By restricting production, the cartel could force a price rise, helping member countries reap big profits.
However, OPEC’s influence had been weakening of late, with non-OPEC countries, including the US, Canada and China, controlling over 60 per cent of the global oil production. The US, under president Donald Trump, had also been an ardent critic of OPEC. Trump accused the cartel of “ripping off the world” by placing artificial restrictions on supplies, and thus controlling prices.
According to analysts quoted by news agency Reuters, the UAE’s move was positive for consumers and the broader economy. “This opens the door for the UAE to gain a global market share when the geopolitical situation normalises,” said Monica Malik, chief economist at the Abu Dhabi Commercial Bank (ADCB).
Jorge Leon, analyst at energy research firm Rystad, underscored the UAE’s significance as one of the few OPEC members, besides Saudi Arabia, with spare production capacity that allows it to add extra oil to the market. “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,” he said.
How will the UAE’s exit from OPEC impact India? New Delhi is the world’s third largest oil consumer, after the US and China, and imports 89 per cent of its crude oil requirements. If OPEC weakens and is unable to jack up prices, it could benefit countries like India. Already, the West Asia war has pushed up crude oil prices past the $100 a barrel mark. On April 30, Brent crude prices were trading over $114 a barrel.
High crude oil prices will increase India’s import bill and widen the country’s current account deficit. A $1 increase in the price of crude oil raises India’s annual import bill by roughly $1.5 billion to $2 billion, as per experts. India imported around 245.3 million tonnes of crude oil in the 2025-26.
This January, the share of Gulf oil in India’s crude imports rose to 55 per cent (about 2.74 mbpd), the highest since late 2022, as refiners reduced their intake of Russian oil. India’s energy dependence on the Middle East has proven to be costly through the war as its gas supplies were severely hit. Data analytics firm Kpler suggests India, the fourth-largest LNG importer, buys about two-thirds of its supply from Qatar, UAE and Oman.
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