UAE OPEC exit creates new uncertainty in oil

Oil markets are suffering a structural shock following the United Arab Emirates’ decision to exit OPEC after six decades, a break that strikes at the cohesion of the group long relied upon to shape global supply and pricing, confirms the CEO of one of the world’s largest independent financial advisory organizations.

Analysis of CEO Nigel Green devere groupOil prices rose following the news, but stopped short of the breakout, with Brent crude trading around $111 a barrel, briefly approaching $120, amid rising tensions involving Iran and risks of a disruption in the Strait of Hormuz.

“This unprecedented move removes a key pillar of oil market stability.

“The UAE is not a marginal player. It is one of the very few producers with both meaningful spare capacity and the operational flexibility to bring barrels online quickly, which is critical for OPEC to manage supply and influence pricing.

“Removing that capacity from the coordinated structure is likely to create a more fragmented supply outlook at a point where markets are already under pressure from the US-Iran war and disrupted shipping routes.”

“Oil is trading higher, but the reaction so far has been quite measured.

“The market is already looking beyond the headlines to see what this means for future supply. There is no immediate loss of barrels, so the move reflects uncertain pricing rather than a real supply shock.

“The risk of near-term disruption is pushing prices higher, while the potential for weak producer coordination is limiting how far the rally extends.”

Short term, conflict risk remains effective. Crude remains strongly supported by any continued disruption through the Strait of Hormuz, and a return to $120 remains “entirely plausible” if tensions escalate or shipping flows are further disrupted.

Attention is turning to the structural implications of OPEC’s influence. The group’s pricing power has long depended on a small number of members with spare capacity acting in coordination, notably Saudi Arabia and the United Arab Emirates. Disagreements among those producers undermine that model.

Nigel Green says: “Medium term, the balance shifts. A less cohesive OPEC reduces the credibility of production caps and forward guidance. The UAE has both the economic incentives and the technical capacity to increase production independently, especially as producers still seek to maximize revenues during periods of strong demand.”

Global oil consumption remains near a record high of more than 102 million barrels per day, supported by demand from major Asian economies and a continued recovery in aviation. Supply growth outside OPEC has been inconsistent, leaving the market vulnerable to internal rifts among exporters.

“Additional UAE supply over the next 12 to 24 months will, we hope, begin to reshape pricing dynamics.

“Assuming that geopolitical tensions stabilize, crude could return to the $80 to $95 range as a barrel continues to rise. However, volatility becomes inherent as coordination risk does not disappear.”

The geopolitical dimension extends beyond energy markets.

The UAE’s repositioning comes with closer financial ties to the US.

President Trump has repeatedly criticized OPEC’s role in maintaining high oil prices, and recent discussions about a potential currency support arrangement between US and UAE officials point to a deeper strategic alignment.

“The strong ties between the UAE and the US offer another layer of influence,” says Deavere’s chief executive.

“Energy strategy, liquidity support and currency stability begin to intersect. A major producer cartel is stepping outside the constraints while strengthening bilateral economic ties with Washington, which is how global markets interpret supply signals.”

Long-term implications relate to the trajectory of global energy demand and the economics of production. Low-cost producers with expansion capacity are facing increasing pressure to ramp up production while demand remains structurally high.

“In the long term, this reflects a strategic shift already underway.

“Producers with scale and low extraction costs are prioritizing volume, aiming to monetize reserves before demand eventually stagnates. It becomes much more difficult to maintain sustained mass discipline, and competitive pressures increase across the market.”

Markets are already reacting across different asset classes. Crude oil as well as energy equities have rallied, while inflation expectations remain sensitive to longer-term oil strength, which has a direct impact on transportation and industrial costs.

“Energy markets are becoming increasingly difficult to read.

“Less shared decisions, more independent moves, and increasing geopolitical pressure mean that prices are likely to be more volatile and faster to adjust.”

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