OPEC: The undoing of an oil regime
Although it was on the cards, it came so fast, that not many anticipated it. The UAE, one of the major partners in the Organisation of the Petroleum Exporting Countries (OPEC), has decided to quit the organisation that was formed 65 years ago to ensure steady prices of oil in the world market by regulating and capping the number of barrels of oil each member country could mine in a day. This, in a way, is the undoing of the oil regime the world has witnessed for over sixty years.
After the departure of the UAE on May 1, 2026, there are now 11 members left in OPEC. This oil regime controlled around 36 per cent of total world oil exports, and OPEC countries sit over almost 80 per cent of the world’s oil reserves. OPEC was formed as a price stabiliser-adjusting output to prevent extreme volatility. The system worked well for several decades, but fissures were visible, and with time, they became bigger cracks in an alliance that was supposed to work on consensus. The departure of Qatar in 2019, Ecuador in 2020 and Angola in 2024 weakened OPEC, but the UAE’s departure is a disaster, which shows growing tension and schism within the group.
The member countries are not content with the allocated quotas. Having invested heavily to raise output potential to nearly five million barrels per day, Abu Dhabi seeks flexibility to monetise its resources, particularly in Asian markets. Though the UAE is no longer bound by the OPEC quota, it can enhance its daily production but may not as oil market is very volatile due to Iran war. In the short term, global oil prices may not immediately collapse but will see downslide eventually. With disruptions around the Strait of Hormuz, through which a significant share of global oil flows, supply constraints linked to regional conflicts have already pushed Brent crude above $100 per barrel. In such a tight market, UAE may opt for gradual output increases to avoid destabilising prices.
However, in the long term, this could lead to a decline in oil prices. A considerably weakened Organization of the Petroleum Exporting Countries (OPEC), with reduced spare capacity and cohesion, will struggle to act as an effective price manager.
OPEC’s influence over oil prices is steadily declining. This weakening is not good news for the US, as the ‘petrodollar’ system, under which global oil trade operates, could be undermined. If more Gulf producers follow the UAE path and diversify their market partnering with China, the OPEC will lose its power. That said, the dollar’s dominance is unlikely to collapse overnight, though American influence over oil and West Asia may weaken. The UAE is expected to expand oil production while investing in renewable energy, positioning itself as a hub for the energy transition.
Both these moves would hurt US interests in the Gulf, as Saudi Arabia, the leader of OPEC, may find it increasingly difficult to enforce discipline within the group, as the members would have the UAE example to emulate. The UAE’s exit may lead to emergence of a competitive and uncertain oil regime. Prices may become more volatile, alliances more fluid, and the balance of power more dispersed. Slowly but surely, the age of tightly managed oil diplomacy is giving way to one defined by strategic autonomy.
