The United Arab Emirates will leave the Organization of the Petroleum Exporting Countries on Friday, in a move that Rystad Energy said makes the cartel "structurally weaker."
The UAE has been a member of OPEC for more than five decades.
Its decision enhances the "flexibility to respond to market dynamics while continuing to contribute to stability in a measured and responsible manner," according to an article by state-owned Emirates News Agency. That article was also shared by UAE Minister of Energy and Infrastructure Suhail Al Mazrouei on social media platform X.
The oil market has faced broad supply disruptions tied to the US-Israel war with Iran. The conflict paused following a ceasefire between the US and Iran and later between Israel and Lebanon.
"This decision reflects the UAE's long-term strategic and economic vision and evolving energy profile, including accelerated investment in domestic energy production," according to the Emirates News Agency article.
The UAE is one of the few OPEC members, including Saudi Arabia, that have spare capacity, Rystad Energy said in a note. OPEC uses a production quota system to stabilize global oil markets.
"Its departure therefore removes one of the core pillars underpinning OPEC's ability to manage the market," Rystad Head of Geopolitical Analysis Jorge Leon wrote.
With the UAE walking away, Saudi Arabia will have to undertake more of the heavy lifting on price stability, Leon said.
"While near-term effects may be muted given ongoing disruption in the Strait of Hormuz and broader geopolitical uncertainty, the longer-term implications are more consequential," Leon said. "A structurally weaker OPEC, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilize prices."
Brent crude was 2.4% higher at $110.82 per barrel, while West Texas Intermediate rose 3.3% to $99.56.