-- The UAE will exit OPEC on May 1, a move that raises risks of oversupply and weaker oil prices from 2027, Wood Mackenzie strategists said in a Wednesday note.
The UAE announced its departure on April 28 after reviewing production strategy and capacity plans, aiming to accelerate domestic energy investments, the report noted.
The country joined OPEC in 1967 and grew into its second-largest producer by liquids capacity, making the exit a major shift for the group, the report said.
"As the nation with the second-largest liquids capacity in OPEC, the UAE's exit is momentous," said Simon Flowers, chairman and chief analyst at Wood Mackenzie.
He said tensions between the UAE and Saudi Arabia have built over recent years and intensified amid the Iran conflict, contributing to the decision.
"UAE's departure from OPEC will have minimal impact on market fundamentals in 2026," Flowers said, noting that Gulf producers need months to restore output even if the Strait of Hormuz reopens.
He added that losing the UAE will make it harder for OPEC to balance markets and increase the risk of oversupply weakening prices beyond 2026.
The UAE committed $145 billion to upstream investment through 2030 to lift output from under 4 million barrels per day in 2020 to 5 million b/d by 2027, Wood Mackenzie macro oils and upstream experts said.
Capacity reached about 4.85 million b/d by 2024, widening the gap between production potential and OPEC+ quota limits, the experts said.
"OPEC+ quotas constrained output well below capacity," Alan Gelder, senior vice president at Wood Mackenzie, said.
He said the group raised the UAE baseline from 3.17 million b/d to 3.5 million b/d in May 2022, but the adjustment reflected only partial capacity growth.
The UAE accounted for about 14% of OPEC capacity, and its exit reduces the group's influence as it controls a smaller share of the global oil market, Wood Mackenzie said.
The closure of the Strait of Hormuz has shut in nearly 2 million b/d of UAE offshore output, limiting supply growth in 2026, and restoring pre-conflict production may take up to six months.
The UAE's exit will likely reshape supply dynamics from 2027, as rising market share competition with OPEC could pressure prices if both sides increase output, Wood Mackenzie said.
Flowers said the UAE holds lower fiscal breakevens than peers, leaving it better positioned to withstand a prolonged period of lower oil prices.