UAE Shakes Up Saudi Dominance...Short-Term High Oil Prices, Long-Term Supply Competition

[The Financial News, New York = Lee Byung-chul]The United Arab Emirates (UAE) has abruptly announced its withdrawal from the Organization of the Petroleum Exporting Countries (OPEC), raising the likelihood of cracks in the long-standing energy power structure that Saudi Arabia has maintained in the Middle East. As OPEC's influence, which has served as the central pillar of global oil price management for decades, weakens, price competition among oil-producing countries to secure market share is expected to intensify. Since U.S. President Donald Trump has openly criticized OPEC's production-cut-driven pricing structure, the UAE's decision could accelerate structural changes in the global crude oil market. Oil prices are likely to see only limited short-term impact, but over the medium to long term, downward pressure may grow as supply competition intensifies.
\r\n\r\n
On the 28th local time, the UAE declared its withdrawal from OPEC at a meeting where Gulf Cooperation Council (GCC) countries gathered in Jeddah, Kingdom of Saudi Arabia (KSA), to discuss responses to the war with Iran. OPEC is an organization created by oil-producing countries to manage international oil prices by adjusting production, and it currently has 12 member states.
Although Qatar left OPEC in 2019, Ecuador in 2020, and the Republic of Angola in 2024, the UAE's departure carries greater significance. The UAE is the third-largest oil producer in OPEC after KSA and Iraq. KSA produces 9 million to 10 million barrels per day, Iraq 4 million to 4.5 million barrels, and the UAE 3 million to 3.5 million barrels. The UAE accounts for about 12% of OPEC's total output.
\r\n\r\n
The UAE has long challenged KSA, the dominant power in the Middle East, in terms of economic and energy leadership. In particular, it has focused on diversifying its economy by accelerating the development of finance, tourism, logistics, and artificial intelligence (AI) industries to reduce its dependence on oil.
As a result, it is seen as having built an economic structure that can withstand low oil prices, unlike KSA's high-price-dependent model. KSA, meanwhile, is pushing industrial diversification under Saudi Vision 2030, but its national finances and growth remain heavily dependent on oil prices.
That difference has also shaped their oil policies. Bashar Alhalabi, senior analyst at Argus Media, a Dubai-based commodities research firm, said, "KSA aims to maintain its dominance in the oil market for the next 100 years, but the UAE feels far less urgency."
\r\n\r\n
The war between the U.S. and Iran has widened the gap between the UAE and KSA. Since the outbreak of the war, the UAE has been one of the countries most frequently targeted by direct Iranian attacks. Over the month from the 28th of last month to the 28th of this month, 2,256 drones and 563 missiles struck the UAE, putting it on the front line of the conflict.
In the process, the UAE came to see the limits of a regional collective security system. According to The Wall Street Journal (WSJ), UAE government officials publicly expressed frustration with the response of multilateral regional bodies. The implication was that expectations for a tougher and more consistent joint response to Iran were not met in reality.
In the end, the view has strengthened that cooperation with a practical security provider matters more than traditional Arab solidarity. While KSA is expanding ties with China and Russia to reduce its dependence on the U.S., the UAE is strengthening technological and military cooperation by normalizing relations with Israel through the Abraham Accords.
\r\n\r\n
In the short term, oil prices are likely to remain strong because the impact of a Strait of Hormuz blockade limits the effect of increased supply. Since Gulf crude exports are constrained by disruptions to passage through the strait, there are limits to how much actual export volumes can rise even if the UAE boosts production.
However, downward pressure on prices could increase in the medium to long term. Once the Strait of Hormuz returns to normal, the UAE will have room to raise output to more than 4.5 million barrels per day, beyond its production quota. That could quickly replenish recently depleted global oil inventories and ease supply concerns.
The bigger variable is the weakening cohesion within OPEC. The UAE's exit, as a key oil producer, could raise the possibility of additional departures by other members and undermine compliance with production-cut agreements. Market watchers say Brent Crude Oil is likely to stay above $100 per barrel in the short term, but after the war ends and the Strait of Hormuz normalizes, prices could gradually turn lower as expectations for increased supply build.
\r\n
\r\n\r\n
\r\n
pride@fnnews.com Lee Byung-chul Reporter