The United Arab Emirates announced on Tuesday that it was leaving OPEC after nearly sixty years. Surprisingly, Saudi Arabia and other Gulf neighbours were not told before the announcement. The cartel learned the news through an official UAE state news agency statement, just like everyone else.
The exit becomes effective on May 1 and ends a relationship that started in 1967, when Abu Dhabi joined OPEC four years before the UAE federation even existed. This removes the group's third-largest oil producer, behind only Saudi Arabia and Iraq.
The timing is difficult. A war involving Iran has effectively closed the Strait of Hormuz, a narrow passage that normally carries about one-fifth of the world's oil shipments. OPEC's production has already fallen significantly.
By Tuesday afternoon, oil prices were rising. Brent crude was trading above $110 per barrel.
The UAE explained its decision using language about long-term planning. The country cited its "long-term strategic and economic vision" and changing energy needs. The UAE's energy minister said the country wanted to produce more oil than OPEC's quota system allowed.
ADNOC, the state oil company, is working towards producing 5 million barrels per day by 2027. Currently, production is around 3.4 million barrels daily.
For OPEC, losing the UAE's 4.8 million barrels per day capacity is significant. The remaining members must now work harder to stabilize global oil prices.
The UAE has been preparing for an economy beyond oil for years. Non-oil sectors now represent roughly 75% of the country's GDP.