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U.A.E's OPEC Withdrawal Likely to Begin Lowering Oil Prices by 2027

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-- The decision by the United Arab Emirates to withdraw from the OPEC cartel on May 1 is unlikely to offer any near-term relief from high oil prices this year, but raises over-supply risks and lower prices beginning as soon as 2027, Woods Mackenzie said on Wednesday.

The UAE's move to leave OPEC comes amid its long-standing push to boost production as it chafed under OPEC quotas while spending to boost its potential output. The country is OPEC's No.3 oil producer and the world's No.7 exporter. Removing quota restrictions makes it a powerful competitor to the cartel and could begin returning the market to over-supply once a recovery from the Iran war is complete.

"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," chief analyst Simon Flowers said in a release.

The analytics firm said when the UAE begins competing with OPEC, OPEC+ and other producers for market share next year "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".

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