UAE to exit OPEC on May 1: What does this mean for oil markets, prices and supply?

The United Arab Emirates announced its decision to leave OPEC and OPEC+ from May 1 but analysts do not believe this move is likely to have an immediate effect on oil markets. However, it could lead to faster supply growth later and put downward pressure on prices once current disruptions ease.

The UAE is the fourth-largest producer in OPEC and one of its largest members.

Barclays noted that the UAE's exit could result in faster oil supply growth as the country recovers from the current crisis. This could reassure investors that the UAE's economic recovery will not be limited by OPEC+ production quotas. HSBC said the near-term impact would be limited but warned that the exit might weaken OPEC+ discipline and its ability to manage prices over time. Russian Finance Minister Anton Siluanov added that the move would allow producers to raise output more freely and could lower global oil prices in the future.

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Barclays reported that tanker flow through the Strait of Hormuz remains low, with the three-day moving average of vessels down about 95 per cent from last year. The Strait of Hormuz, which handles about 20 per cent of global oil and LNG supplies, remains largely shut due to stalled peace talks between the US and Iran.

HSBC said crude exports from the Gulf are constrained by disruptions in the strait, effectively closed since late February. Any increase in UAE output is limited while shipping access remains restricted. The Abu Dhabi Crude Oil Pipeline, which bypasses Hormuz by carrying crude to Fujairah port, has a capacity of about 1.8 million barrels per day and is likely operating near full capacity.

Once access through Hormuz is restored, the UAE would no longer be bound by OPEC+ production quotas and could gradually raise output. HSBC estimated that ADNOC could increase production to over 4.5 million barrels per day, compared with an OPEC+ quota of about 3.4 million barrels per day for May 2026. The increase in supply is expected to be phased in over 12 to 18 months, in line with ADNOC's plans to raise output gradually based on demand and market conditions.

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Additional UAE barrels would help rebuild global oil inventories after recent draws. Over the longer term, HSBC said the UAE's departure could undermine OPEC+ cohesion and credibility, making supply management more difficult. The UAE's expanding production capacity and $150 billion investment programme through 2030 suggest an intention to monetise reserves with fewer output constraints.

The loss of UAE participation could increase the risk of compliance slippage among remaining OPEC+ members, weakening the group's ability to manage prices during periods of softer demand or rising non-OPEC supply. ANZ said the near-term impact on oil prices would be limited, as prices are currently driven more by geopolitics, inventories, and logistics than institutional changes.

ANZ added that even if the UAE is no longer constrained by OPEC+ targets, its ability to convert capacity into exportable supply will depend on the operating environment around the Gulf's critical chokepoint. Siluanov said the UAE's exit would allow oil-producing countries to boost production, which could lower global prices in the future.

Russia, a member of OPEC+, has coordinated its policies with OPEC members and benefited from the recent spike in oil prices caused by the Middle East conflict.