If one of the major Persian Gulf countries switches to a model of independent production maximisation, other producers dissatisfied with the strict restrictions may adopt a similar logic, writes Igbal Guliyev.
The United Arab Emirates announced its withdrawal from OPEC and OPEC+ effective from May 1, 2026, ending nearly sixty years of participation in the cartel. This represents the largest institutional upheaval to the oil production coordination system since the creation of the expanded OPEC+ format in 2016, and is perceived by the market as a step toward weakening the group’s ability to manage global oil prices.
At the same time, this move reflects Abu Dhabi’s strategic focus on maximising its own production and growing market share while maintaining its image as a “responsible supplier” and relying on long-term growth in global energy demand. The UAE’s withdrawal will undoubtedly increase global production growth and, consequently, put downward pressure on prices in the medium term, especially after the Strait of Hormuz is unblocked. The UAE’s decision is already being called one of the most significant institutional shifts in the energy market in the past ten years. UAE authorities are presenting this move as a “strategic reassessment project” linked to national economic interests, rather than a one-off conflict over quotas.
This “move” by the UAE marks a shift from collective coordination to an individual strategy among major producers and directly affects Russia’s interests amid geopolitical instability around the Strait of Hormuz.
Over the past few years, tensions have been building between Abu Dhabi and Riyadh over the distribution of quotas within OPEC+. The UAE has invested in capacity expansion but has been limited in its ability to monetise it due to collective commitments to reduce production. Indeed, even before the official announcement in 2026, the UAE repeatedly signalled dissatisfaction with the level of its quotas and a desire for greater autonomy in production decision-making. Official statements from the UAE government and Energy Minister Suhail Mohamed Al Mazroue emphasise that the move to leave OPEC is a sovereign “political decision” regarding energy policy, made after a “lengthy and thorough review” of the national strategy. The official language highlights several key motivations:
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Consistency with the UAE’s “long-term strategic and economic vision” and the evolution of the country’s energy sector.
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The need to focus on national interests and priorities while maintaining the image of a “responsible and reliable supplier”.
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Expected sustainable growth in global energy demand in the medium and long-term, which justifies expanding domestic production and investing in capacity.
The key economic driver of the decision is the significant expansion of the UAE’s production capacity and the desire to fully monetise it outside the rigid quota system. It should be noted that the UAE’s current production is approximately 3.4–3.5 million barrels per day, with plans to increase capacity to 5 million barrels per day by 2027 through investments in upstream projects.
For several years, the UAE has invested significantly in expanding its production base, including through ADNOC, increasing both nominal capacity and oil quality and environmental performance (low carbon intensity). However, within OPEC and OPEC+, some of this capacity remained effectively unused due to existing restrictions, causing economic dissatisfaction and prompting a search for a more flexible regime.
For the UAE, where GDP growth and fiscal sustainability are closely tied to hydrocarbon exports, the opportunity to more aggressively increase production as global demand recovers and grows is seen as a way to accelerate resource monetisation before a possible structural shift in demand toward low-carbon sources. In this context, Abu Dhabi perceives its withdrawal from OPEC as a defence of national income from external constraints and asymmetries of interests within the cartel.
The medium-term goal is to increase production by more than 30% and strengthen the UAE’s position as a key supplier to rapidly growing Asian markets, including China and India. Authorities emphasise that OPEC quotas, at a time when the country is completing large-scale investment cycles in oil and gas projects, are beginning to appear as an artificial “brake pedal” on potential.
Against this backdrop, leaving OPEC appears to be part of a broader diversification strategy: the UAE is simultaneously developing traditional oil export flows, gas, petrochemicals, and low-carbon sectors, including renewable energy. In this model, oil and gas become not goals in themselves, but a source of capital for further diversification, meaning any restrictions on export volumes automatically slow down this trajectory.
The financial benefits of the UAE’s exit are obvious. In the short and medium term, the country gains the opportunity to:
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increase exports when prices are favourable,
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redistribute flows toward more solvent markets,
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accelerate the implementation of infrastructure and petrochemical projects, using high price waves as a “capital trap”.
This could lead to a significant increase in export revenues and accelerate the accumulation of foreign exchange reserves, which is especially important for an economy actively participating in global financial flows (Dubai, financial centres, SWFs).
However, the economic risks are also significant. First, leaving OPEC weakens the collective mechanism for market stabilisation, increasing price volatility. With oil prices becoming more volatile, budget planning becomes more difficult: revenues fluctuate sharply, and fiscal cushions and reserve funds must be designed for a wider range of scenarios.
Second, the political weight and institutional influence that OPEC+ provided is partially lost. Instead of jointly participating in shaping the “rules of the game”, the UAE is becoming a major, albeit separate, player whose decisions are perceived by the market as an external factor rather than part of an institutional consensus. This increases the risk that the UAE will be perceived as a “destabilising” factor in crisis situations, which could, in turn, increase pressure from partners and regulators.
We understand that leaving OPEC is not only economic but also symbolic—a demonstration of the UAE’s willingness to pursue its own policy in the face of fragmentation in the regional security architecture and energy coordination. In terms of supply structure, the UAE’s exit means the potential entry of 1-1.5 million barrels per day of additional volumes into the market in the medium term as production expands and transportation infrastructure is restored. Combined with the potential reaction of other producers, this leads to:
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A reduction in the market’s overall “fear” of a shortage and, consequently, pressure on forward prices.
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A weakening of the strength of OPEC+ cartel signals and an increased role for individual producer strategies.
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A further shift in the market’s centre of gravity toward competition between large independent players (the US and others).
In the short term, the market may react to the UAE’s exit as a “risk shock”: any news about quota revisions, increased production, or disruptions to logistics in the Strait of Hormuz will increase volatility. At the outset of such a scenario, both upward and downward spikes are possible as participants revise their forecasts for future supply levels and prices. In the medium term, the key question is whether other producers will follow the UAE and whether a real discipline will be maintained among the remaining OPEC+ members. If so, relative stabilisation is possible, albeit with higher underlying volatility. If not, the market could shift to a regime where supply is driven not by coordination but by individual decisions, leading to more frequent and sharp price fluctuations.
For the global economy, this means increased uncertainty in energy costs, more complex investment planning, and higher risk premiums in financial markets. In oil-importing countries, increased price volatility exacerbates difficulties in managing inflation and threatens the sustainability of budgets and foreign trade balances.
From a geoeconomic perspective, the UAE’s withdrawal from OPEC fits into a broader trend of fragmentation in global energy governance and the strengthening of regional and bilateral alliances. For Russia, this creates both risks to budget revenues and an opportunity to deepen bilateral energy and financial-investment cooperation with the Emirates within the changing architecture of the global oil market. Regarding Russia’s reaction to the UAE’s decision, the first public response was voiced by Finance Minister Anton Siluanov, who directly linked the UAE’s withdrawal to the prospect of increased global production and lower prices in the future. According to him, the Emirates’ withdrawal means the country will be able to produce as much oil as its capacity allows and supply it to the market without restrictions. If other OPEC countries adopt a similar approach, aggregate supply will increase and prices will decline.
Siluanov emphasised that current prices are supported primarily by the blockade of the Strait of Hormuz and the associated supply risks, while the expected effect of excess supply will materialise later on, after shipping resumes. At the same time, the Russian side specifically stresses the preservation of close relations with the UAE and Saudi Arabia, as well as an interest in continuing coordination within the expanded format of producers, even with the institutional weakening of OPEC+. This is consistent with the logic of Russian energy diplomacy, which aims to maintain informal channels of coordination and strengthen bilateral cooperation with key regional players. For Russia, this creates both challenges and opportunities.
Among the key challenges:
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Potential pressure on prices with rising supply, which directly impacts budget revenues and development financing opportunities.
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Weakening of collective coordination mechanisms through which Russia could influence the market through OPEC+.
Among the opportunities:
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Deepening energy, investment, and financial cooperation with the UAE as an increasingly independent geoeconomic player interested in partner diversification.
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Developing joint projects in logistics (bypassing Hormuz, using alternative routes), oil and petroleum product trading, as well as through sovereign wealth funds and settlement infrastructure, based on de-dollarisation.
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Using a bilateral format to coordinate approaches to market stabilisation at critical moments, complementing formal OPEC+ mechanisms rather than replacing them.
The UAE’s withdrawal from OPEC and OPEC+ should not be interpreted as a price collapse or the dissolution of the cartel in the literal sense. Rather, it is a transition to a new regime, where the role of collective quotas is diminished, and the importance of national economic interests, geopolitical games, and individual market decisions increases.
The market has already reacted to the UAE’s decision. On April 30, prices soared to $126 per barrel. The oil market is currently driven not by pure economics, but by geopolitics and logistics, which is why we see such quotations and an extremely high “risk premium”. Against this backdrop, I would consider the UAE’s withdrawal from OPEC and OPEC+ not as a trigger for a price spike, but as a factor that changes the market architecture for several years to come.
What is currently pushing oil prices higher?
The main economic motive for the UAE’s withdrawal from OPEC can be summarised briefly: the country no longer intends to maintain its production potential within the limits set by the collective system when it believes it can produce and export more than the quotas allow. The UAE leadership has stated this directly, pointing to the need to “revise production policy and strengthen autonomy in the management of the oil and gas sector”.
From an economic perspective, this is not just a question of how many barrels Abu Dhabi and Dubai will produce, but rather how the global oil coordination architecture itself will be structured. OPEC and OPEC+ are ceasing to be a monolith, even in a formal sense: one of the largest and most flexible producers is going “independent”, transforming the market from a quota-based cartel into a more fragmented, sensitive one, driven not only by economics but also by geopolitics.
First, I believe the main driver is the blockade of the Strait of Hormuz and the associated supply and logistics shock. Under normal circumstances, up to a fifth of global seaborne oil trade passes through the Strait of Hormuz, and today this “chokepoint” is effectively partially blocked by the military confrontation between the US and its allies on the one hand and Iran on the other. The US command, on President Trump’s orders, imposed a blockade of the Strait, which immediately pushed prices higher: it was the blockade of Hormuz and the Iranian factor that drove Brent to $126.
Second, I would emphasise the role of the “fog of war” and informational nervousness surrounding Iran. On the one hand, there are reports of attempts at a ceasefire and mediation, on the other, there are constant discussions about plans for new strikes on Iranian infrastructure, the timing of the blockade, and so on. The market is essentially trading headlines today: any clarification that the Hormuz Strait could remain partially closed for longer than a month is immediately priced in through an additional risk premium.
Third, I believe it’s important that this geopolitical shock is coming on top of an already “tight” supply situation. In 2024-2025, OPEC+, with voluntary cuts, including those made by Russia and Saudi Arabia, consistently limited production and very carefully reintroduced the withdrawn volumes to the market. Production increases were paused for the first quarter of 2026, so any loss of barrels from the Persian Gulf now hits the market harder than it would have in the context of excess inventory.
From an OPEC+ perspective, I would note that short-term peaks in the $140-$150 range are possible if the geopolitical crisis drags on, but maintaining the market in this “demand destruction zone” for the long term is not beneficial for either Russia or Saudi Arabia. Exporting countries are well aware that persistently high prices are sharply accelerating the shale revolution in the US and investment in alternative energy in the West. Therefore, as soon as a window of opportunity opens, the alliance will try to return prices to a more comfortable fundamental range of, say, $80-$100.
How does the UAE’s withdrawal from OPEC and OPEC+ affect prices?
The short-term market reaction was quite symptomatic: immediately after the UAE’s announcement of its withdrawal on May 1, oil prices, which had previously been rising due to the Iranian factor, corrected slightly as participants began to anticipate future supply growth from the Emirates and a potential “production race” between producers. But in reality, and this is crucial, the Emirates themselves are physically unable to sharply increase exports while the Strait of Hormuz is partially blocked — the route simply doesn’t exist. Therefore, I believe that in the coming months, the decisive factor will not be the UAE’s exit, but the fate of the Strait of Hormuz.
The long-term situation is different. The UAE accounts for approximately 3-3.5 million barrels per day of production and about 6% of OPEC’s total, with the stated goal of increasing capacity to 5 million barrels by 2027. The exit of such a player weakens the combined share of OPEC and OPEC+ and reduces their ability to gently balance the market through quota mechanisms after the crisis ends. I believe the key here is precedent: if one of the major Persian Gulf countries switches to a model of independent production maximisation, other producers dissatisfied with the strict restrictions may adopt a similar logic.
OPEC+ is currently discussing a new decision on adjusting production quotas. The decision will underscore two things: first, that OPEC+ remains a working coordination mechanism despite the UAE’s withdrawal—Russia, Saudi Arabia, and others continue to act in concert. Second, that the alliance is prepared to gently, in small steps, return previously withdrawn barrels to the market as the geopolitical shock subsides, preventing either a price collapse or an uncontrolled surge.
Looking further into the period after the Hormuz unblocking, I believe it is the combination of these additional OPEC+ volumes, the future increase in UAE production outside of OPEC, and increased supply from other independent producers that will gradually deflate the current premium and return the market to its fundamental range. The UAE’s withdrawal could trigger a “supply race” after logistics are normalised, and in this race, the coordinated position of Russia, Saudi Arabia, and their partners will be the key factor in determining whether the price decline is manageable or whether we see another price collapse.
Conclusion
For Russia, the key task is adapting its fiscal and energy policies to the potential for lower prices and rising supply, while deepening its strategic partnership with the UAE and other major exporters in Asia and the Middle East. In the context of increasing fragmentation of global energy governance, a combination of flexible domestic policies and active geoeconomic diplomacy can mitigate risks and transform structural shifts into sources of additional influence and stability.
The UAE’s withdrawal from OPEC and OPEC+, in my view, signals that the era of rigid agreements is giving way to a more complex multipolar market architecture, where the role of political coordination is increasing, not disappearing. In this architecture, Russia, by maintaining its commitment to OPEC+, has the opportunity to strengthen its status as one of the key architects of the global oil balance.
