There had been murmurs for years. Yet, when the United Arab Emirates (UAE) announced its exit from OPEC (Organization of the Petroleum Exporting Countries), it came as a shock. The exit of a major member will weaken the powerful cartel’s ability to influence global oil supply and prices as it did for decades.And that may be a good thing for large oil importers such as India — the world’s third-largest consumer of crude oil which depends on imports to meet nearly 89% of its requirement.The UAE’s decision, and the consequent structural weakness within OPEC, is expected to exert downward pressure on oil prices in the longer term. In the short term, however, there will be no impact as long as the Strait of Hormuz remains blocked, say experts and analysts.It is clear that the UAE wants to produce as much oil as possible, even in a low oil price environment. This would mark a divergence from the years of production quotas enforced by OPEC’s de facto leader, Saudi Arabia, to influence oil prices.OPEC and the UAEFounded in September 1960 at the Baghdad conference in Iraq, OPEC was originally established by five members — Iran, Kuwait, Iraq, Saudi Arabia and Venezuela. Prior to OPEC’s formation, Western multinational oil companies (often referred to as the Seven Sisters) largely dictated the prices paid to oil-producing nations. OPEC was created to counter this dominance, coordinating the petroleum policies of its member states to ensure that they received stable returns.The UAE formally joined the alliance in 1967, six years before the OPEC oil embargo was imposed on nations like the US and the Netherlands owing to their support of Israel in the Arab-Israeli war. With oil prices nearly quadrupling in that period as a result, OPEC steadily gained geopolitical leverage while extending membership to countries such as Algeria and Nigeria. In 2025, the UAE was OPEC’s fourth-largest oil producer, accounting for over 11% of the group’s cumulative oil production. It trailed Saudi Arabia, Iraq and Iran.The wider OPEC+ alliance was created in 2016. It included 10 major non-OPEC producers led by Russia. A response to the US’s booming shale oil production, OPEC+ produced over 40% of the world’s crude oil.Story continues below this adOPEC, and OPEC+ by extension, derive their power through their influence in oil supply management. OPEC attempts to manage oil prices by regulating production limits and setting strict quotas for each of its member countries. The Saudi Arabia-led group claims that the production quota system is designed to protect the market from oversupply during times of reduced global demand.Conversely, it also affords them the luxury of increasing production during supply shortages, ensuring that prices do not skyrocket. Given these countries’ heavy dependence on oil revenues, such mandates allow them to protect their domestic budgets from unforeseen shocks.Why the UAE wants to pump more oilThe Iran war has led to scarcity of oil in the international market and a surge in prices, primarily due to the effective closure of the Strait of Hormuz — the critical maritime chokepoint that normally accounted for a fifth of global oil flows. But once the Strait reopens, and after the initial oil buying spree by countries to fill up their depleted strategic and commercial oil inventories subsides, there is bound to be more than enough oil available in the market.Shouldn’t that make major producers regulate production to keep oil prices buoyant, something that OPEC and OPEC+ have already been doing?Story continues below this adThe UAE doesn’t seem to agree, and it has its reasons.According to Rystad Energy, as global oil demand approaches a peak and begins to decline due to the transition to renewables, incentives for countries like the UAE are shifting. Such producers — with spare production capacity — may prioritise monetising reserves and protecting market share over collective restraint. The UAE, with capacity of around 4.8 million barrels per day (bpd) and significant room to increase output, is “particularly well positioned” to pursue such a strategy outside the OPEC, it said.“With demand nearing a peak, the calculation for producers (like the UAE) with low-cost barrels is changing fast, and waiting your turn inside a quota system starts to look like leaving money on the table,” said Jorge Leon, head of geopolitical analysis at Rystad Energy.In his recent column on the development, Reuters energy columnist Ron Bousso wrote: “Like other Gulf producers, the UAE sits on vast oil reserves and enjoys some of the world’s lowest extraction costs. This means it is in a strong position to generate profits even during prolonged periods of low prices. That advantage has made Saudi-mandated production curbs progressively harder to justify from Abu Dhabi’s perspective. While the curbs prop up prices, they also cap revenue and can cede market share to higher-cost rivals”.Story continues below this adOn top of this, there is a finite window to monetise hydrocarbons as oil consumption is widely expected to peak in the coming decades, according to Bousso.“Producers thus have more incentive to maximise output now rather than restrain it in defence of long-term price stability. As Saudi Arabia has struggled to rein in overproduction in recent years, the UAE has frequently exceeded its assigned quotas, leaving relations between Riyadh and Abu Dhabi increasingly fraught,” he added.Backed by investments worth about $150 billion, the state-owned Abu Dhabi National Oil Company (ADNOC) had set a target of increasing the UAE’s maximum sustainable crude oil production to 5 million bpd by 2027. OPEC’s production quotas have seen the UAE producing at a far lower level than its current output capacity. In 2025, it produced just over 3.1 million bpd of oil, against its capacity of 4.8 million bpd. After exiting OPEC, it will be free to pursue its targeted production levels without artificial constraints.Abu Dhabi’s move is also tied to the region’s vision of shifting away from fossil fuels and diversifying its economy. The UAE has expanded into sectors such as education and technology in the hopes of attracting, and retaining, top talent from around the world.Story continues below this adDoing so requires pumping out more oil to accumulate the capital required to transition to a post-oil economy.Downward pressure on oil prices?According to Bousso, the UAE’s exit from OPEC could open the door for an all-out price war once Gulf producers rush to regain market share once the Iran war is over.“The UAE’s exit not only further erodes OPEC’s market share but may also encourage other OPEC+ members to question the value of limiting output, weakening collective decision-making and raising the risk of further defections. More importantly, once the Iran war ends, this new dynamic could mark the opening shot in a bitter struggle for market share among major producers — OPEC+, the UAE and the US — potentially triggering a sharp drop in oil prices and years of turbulence,” he wrote.OPEC itself has weakened over the years, with its share in global oil production falling from roughly half in the 1970s to less than a third now. Non-OPEC producers now account for roughly 70% of global oil production. Moreover, the group has come under attack from various countries, including the US. For long, Donald Trump has accused the cartel of “ripping off the world” by artificially propping up oil prices. And amid the West Asia war, this move by the UAE is also being seen as Abu Dhabi’s close alignment with Washington on oil production and prices.Story continues below this adNow, a lot would actually depend on how OPEC and OPEC+ respond in the coming months. Initial indications from the groupings are of unity and a shared commitment. Kremlin spokesman Dmitry Peskov reportedly said OPEC+ remains an important organisation, especially during current turmoil on global markets. “This format helps to substantially, let’s say, minimise fluctuations in energy markets and makes it possible to stabilise those markets,” Peskov told a daily conference call with reporters, according to news reports.Nonetheless, with a major OPEC producer now on its way to increase oil production, downward pressure on oil prices — once regular traffic resumes through the Strait of Hormuz — is a fair expectation over the medium term, even if there is no all-out price war.For large oil importers like India, which are always on the lookout for cheap and economical barrels, the outlook is positive. Given that India imports 1.8-2 billion barrels of crude oil a year, every $1-per-barrel change in oil prices impacts the country’s oil import bill by up to $2 billion on an annualised basis.“(The UAE’s) OPEC exit does not materially change near-term supply availability for India. Over the longer term, however, the outlook is more constructive. The UAE has been steadily expanding upstream capacity and, outside OPEC constraints, could raise production. We need to see if this happens. At the same time, energy ties with India continue to deepen, supported by strategic engagement and growing cooperation (of Indian oil companies) with ADNOC,” said Sumit Ritolia, manager, modelling & refining at commodity market analytics firm Kpler.