Wood Mackenzie: UAE exit rattles OPEC’s grip on the oil market and increases risk of medium-term oil price decline from 2027 as market share competition emerges

The UAE, which joined OPEC in 1967 and grew to become the group's second-largest producer by liquids capacity, announced its departure on 28 April 2026. The country's Ministry of Energy and Infrastructure said the decision follows a review of production policy and capacity outlook and aligns its strategy to accelerate domestic energy investment.

Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, said: "As the nation with the second-largest liquids capacity in OPEC, the UAE's exit is momentous. However, it's not entirely surprising as political tensions between the UAE and Saudi Arabia have been building over the last few years and have intensified in recent months amid the ongoing conflict in Iran.

"UAE's departure from OPEC will have minimal impact on market fundamentals in 2026, even if the Strait of Hormuz reopens. Gulf countries, including the UAE, will take months to return to pre-war production volumes. Beyond this year, losing the UAE will compound OPEC's challenge to balance the market and increase the risk of oversupply weakening prices."

Wood Mackenzie's Macro Oils and Upstream experts – Alan Gelder, Douglas Thyne, Hazel Seftor, Alexandre Araman, and Dalia Salem – identify the widening gap between the UAE's production capacity and OPEC+ quota allocations as a central factor. The country committed US$145 billion (real, 2026) to its domestic upstream oil sector over the decade to 2030. The overarching goals are to sustain oil production and expand capacity from under 4 million bpd in 2020 to 5 million bpd by 2027. By 2024, capacity had reached 4.85 million bpd.

“OPEC+ quotas constrained output well below capacity," said Alan Gelder, SVP Refining, Chemicals & Oil Markets at Wood Mackenzie. “In 2021, OPEC+ talks stalled as the UAE pushed for a higher baseline. The eventual compromise raised the baseline from 3.17 million bpd to 3.5 million bpd from May 2022, but only partially reflected capacity growth.”

Market implications

• OPEC's diminished influence: The UAE accounted for about 14% of OPEC capacity. Even with no change in UAE production policies, OPEC's stature has been diminished as it exerts influence over a smaller fraction of the global oil market.
• Near-term impact limited: The ongoing closure of the Strait of Hormuz has shut in close to 2 million bpd of UAE offshore production. The country's ability to increase supply in 2026 is restricted regardless of policy changes. Even once transit through Hormuz resumes, a return to pre-conflict production levels may take up to six months.
• 2027 supply dynamics: The UAE's exit is more likely to influence supply dynamics in 2027 and beyond. The UAE has the capability to take a growing share of global oil demand, which challenges OPEC's current policy of unwinding its voluntary cuts. If tensions escalate, competition between the UAE and OPEC for market share could send medium-term oil prices sharply lower.

"The capacity-quota dispute reflects deeper political fractures and tensions between Saudi Arabia, and the UAE have been steadily building,” concludes Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie. “The UAE has much lower fiscal oil price breakevens relative to its peers, leaving its economy relatively resilient and better able to sustain a potential period of low prices."

Read the article online at: https://www.worldpipelines.com/special-reports/30042026/wood-mackenzie-uae-exit-rattles-opecs-grip-on-the-oil-market-and-increases-risk-of-medium-term-oil-price-decline-from-2027-as-market-share-competition-emerges/