UAE Exit Eroding OPEC Production Discipline; Strait Of Hormuz Risks Persist
By Siti Radziah Hamzah
KUALA LUMPUR, April 29 (Bernama) -- The United Arab Emirates’ (UAE) exit from the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) is unlikely to destabilise the alliance in the near term.
However, it may erode the production discipline that has long supported the group’s ability to coordinate supply, said SPI Asset Management managing partner, Stephen Innes.
He said the move does not change the fact that the Strait of Hormuz remains a critical chokepoint for global oil flows.
“The UAE stepping away doesn’t break the OPEC overnight, but it chips away at the one thing that has always mattered most: discipline.
“You can talk about more barrels all you want, but if they can’t move freely, supply stays constrained, and prices stay supported by risk,” he told Bernama.
The UAE has announced its exit from OPEC and its allies (OPEC+) effective May 1, citing national interests and long-term energy strategy.
The move is seen as a significant blow to the oil-producing groups amid an ongoing energy shock linked to the conflict involving Iran.
“Where this gets interesting is what comes next. Once the conflict cools and shipping normalises, the market is staring at a potential full-scale pumpathon.
“The UAE has been signalling for a while that it wants the freedom to produce more and monetise its capacity. Leaving OPEC removes that ceiling. That is not a short-term story, but it’s a very real medium-term one,” Innes said.
He added that current market conditions remain driven by disruption rather than abundance, particularly with the Strait of Hormuz remaining a key transit route.
However, he noted that the outlook could shift once tensions ease and shipping normalises, with risks tilting towards oversupply in the medium term.
“In the medium term, once the blockade in the Strait is cleared, the risk shifts toward too much supply rather than too little,” he said.
Innes said the UAE’s move reflects both strategic and political considerations, including its long-term objective to gain greater flexibility in managing production and monetising capacity.
He added that the exit also points to weakening cohesion within OPEC, raising questions about how effectively the group can maintain collective discipline going forward.
“When a serious Gulf producer starts stepping away, it raises questions about how tightly the rest of the group can hold the line,” he said.
On whether other members could follow, he said that while such a scenario is not imminent, the possibility remains.
“OPEC isn’t collapsing, but the grip is loosening,” he said, adding that this could encourage producers to place greater emphasis on market share over coordinated restraint.
Several members have exited OPEC in recent years, including Indonesia (2016), Qatar (2019), Ecuador (2020) and Angola (2023).
-- BERNAMA