'UAE quits OPEC, gains flexibility; oil prices to stay...': Julius Baer report

The United Arab Emirates’ decision to exit the Organization of the Petroleum Exporting Countries (OPEC) marks a significant shift in the global oil landscape, raising key questions about supply dynamics, pricing power, and the future relevance of oil cartels. According to the Julius Baer report titled “New Oil: Breakaway During the Queen Stage”, the move reflects deeper structural changes already underway in global energy markets.

While the decision may appear sudden, the report suggests it has been building over years. The UAE has consistently pursued a strategy focused on expanding oil and gas production capacity, often clashing with OPEC’s supply restraint approach.

UAE's strategy

One of the most immediate changes following the UAE’s exit is increased autonomy over production decisions. Freed from OPEC quotas, the UAE can now fully utilise its expanded capacity. “By leaving OPEC, the UAE gains the flexibility to monetise its investments in oil and gas production without being constrained by collective supply restrictions,” said Norbert Rücker, Head of Economics & Next Generation Research, in the Julius Baer report titled “New Oil: Breakaway During the Queen Stage”.

This flexibility is expected to gradually increase global oil supply, especially as the UAE has invested heavily in upstream capacity, LNG exports, and infrastructure.

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OPEC power

Despite the headline impact, the report highlights that OPEC’s core influence may remain intact in the near term. Saudi Arabia continues to act as the group’s primary policy driver.

“While the exit limits OPEC’s influence on paper, the group’s policy direction has largely been shaped by Saudi Arabia,” Rücker noted in the Julius Baer report titled “New Oil: Breakaway During the Queen Stage”.

However, the exit underscores internal fractures within the cartel, particularly differing priorities between expansion-focused and price-supporting members.

Competitive oil market

The report emphasises that the real transformation lies beyond OPEC. The global oil market is increasingly shaped by competition from US shale, South American deepwater projects, and energy transition trends. “The real challenge is not the UAE’s exit, but the structural shifts in the oil market—rising competition, new supply sources, and evolving demand patterns,” Rücker said in the report.

The rise of electric vehicles and alternative fuels is further contributing to a gradual plateau in oil demand growth.

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Oil prices

In this new environment, the report expects oil prices to remain capped over the long term. “The market is moving toward a setting of ample supply and stronger competition, which should keep oil prices anchored in the high $60 per barrel range,” Rücker added.

Geopolitical risks

The report also highlights that geopolitical risks—such as Iran-related tensions or infrastructure disruptions—could drive short-term price volatility, while de-escalation or economic slowdown may weigh on prices.

As the Julius Baer report concludes, the UAE’s exit reflects a broader transition toward a more competitive, less cartel-driven oil market. Over time, this could redefine how global oil prices are determined, shifting the balance from coordinated supply control to market-led dynamics.

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