The UAE's decision had been rumored as a possibility for some time, as it pushed back in recent years against OPEC production quotas it felt had been too low — meaning it wasn't able to sell as much oil to the world as it had wanted.
“Having invested heavily in expanding energy production capacity in recent years, the bigger picture is that the UAE has been itching to pump more oil; it ultimately feels that being outside of its OPEC+ ‘obligations’ will give it more 'flexibility,'” Capital Economics wrote in an analysis.
“Today’s move fits with our existing view that the ties binding OPEC members together have loosened,” it said, particularly after Qatar withdrew from the cartel in 2019.
Regional politics are also likely at play. The UAE has had increasingly frosty relations with Saudi Arabia, OPEC's largest producer, over political and economic matters in the Mideast, even after both came under attack by fellow OPEC member Iran during the war.
The UAE’s withdrawal from OPEC won’t necessarily have any immediate effects in markets. That’s because world oil supplies are sharply constrained by the war in Iran, which has closed off the Strait of Hormuz, a waterway through which one-fifth of global oil supplies is transported.
OPEC, based in Vienna, had already seen some of its market power wane in recent years as the United States increased its production of crude oil.
