Frankfurt. The United Arab Emirates’ decision to leave OPEC is rattling the 65-year-old alliance that produces about 40% of the world’s crude oil and exerts significant influence over global energy prices.

In an announcement Tuesday, the UAE said it would exit the oil cartel on Friday, adding that it plans to continue increasing crude production “in a gradual and measured manner, aligned with demand and market conditions.”

For now, the move has little immediate impact on oil prices. Iran’s blockade of the Strait of Hormuz — a critical shipping lane for Persian Gulf producers including the UAE — has disrupted exports, overshadowing other market factors. Over the longer term, however, the UAE’s departure could reshape supply dynamics.

Here’s what to know about the decision:

OPEC’s Role in Managing Oil Prices
The Organization of the Petroleum Exporting Countries was founded in Baghdad in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. It now has 12 members, including the UAE, which collectively hold more than 80% of the world’s proven oil reserves. Other members include Algeria, Equatorial Guinea, Gabon, Libya, Nigeria and the Republic of the Congo.

Headquartered in Vienna, OPEC seeks to regulate oil prices by coordinating production levels among its members.

The group aims to keep prices high enough for member governments to balance budgets and benefit from natural resources, but not so high that they trigger recessions or reduce demand — a phenomenon known as demand destruction.

That strategy has often drawn criticism from U.S. leaders, where gasoline prices are politically sensitive. President Donald Trump once accused OPEC of “ripping off the rest of the world,” while his successor, Joe Biden, also urged the group to boost output.

OPEC says its mission is to “coordinate and unify petroleum policies” to ensure stable prices, reliable supply and fair returns for investors.

The cartel marked a shift from Western oil company dominance toward greater control by resource-rich nations. Its actions have periodically reshaped the global economy — most notably in 1973, when Arab members imposed an oil embargo on countries supporting Israel during the Yom Kippur War, sending prices soaring and triggering fuel shortages.

In 2016, OPEC expanded its influence by forming OPEC+, an alliance with 10 additional producers led by Russia.

UAE Seeks Greater Production Freedom
The UAE’s exit reflects its desire for more autonomy over output levels. While cartel membership can support higher prices, it also limits production and market share.

Tensions have simmered for years between the UAE and Saudi Arabia, OPEC’s largest producer and de facto leader.

Another factor is the long-term outlook for oil demand. Analysts expect consumption to peak in coming decades as the global economy shifts toward renewable energy and lower-carbon sources.

That raises the risk that oil reserves could lose value over time, encouraging producers to maximize output sooner rather than later.

Potential Impact on OPEC’s Influence
The UAE’s departure removes one of the group’s few members with the capacity to quickly ramp up production — a key tool OPEC uses to manage prices.

“A structurally weaker OPEC, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilize prices,” said Jorge Leon, head of geopolitical analysis at Rystad Energy.

“The net effect points to a more fragmented supply landscape and a potentially more volatile oil market over time.”

Short-Term Impact Limited by Hormuz Disruption
In the near term, oil prices remain dominated by the situation in the Strait of Hormuz, through which about a fifth of global oil and gas supplies pass.

Iran’s blockade has effectively curtailed exports from Gulf producers, tightening supply and pushing prices higher.

“If the UAE increases production after the conflict, it could help bring prices back toward pre-war levels,” said Michael Brown, a research strategist at Pepperstone.

“For now, all that really matters is whether the Strait of Hormuz is open or closed,” he said. “At present, it’s essentially shut, tightening supply conditions and likely pushing benchmark prices higher day by day.”

Add as a preferred source on Google +