Investing.com — The United Arab Emirates (UAE) has officially announced its withdrawal from OPEC, effective 1 May 2026. This historic shift follows longstanding friction over production targets and heightened regional tensions, says a UBS report.

UAE Energy Minister Suhail Al Mazrouei described the exit as a “strategic imperative” to secure “unfettered flexibility” in the nation’s long-term energy planning.

The announcement marks a landmark event in oil diplomacy, but UBS analysts expect a muted impact on global prices initially. Physical export bottlenecks, primarily involving the Strait of Hormuz, currently prevent a sudden surge in supply.

However, the analyst report warns of “significant downside risks to oil prices in the medium term” as the UAE moves to monetize its massive investments in production capacity.

The UAE maintains a current capacity of 4.5 million barrels per day (Mb/d), significantly higher than its recent production of 3.6 Mb/d. Plans are already underway to expand this to 5 Mb/d by 2027.

Free from OPEC+ quotas, the UAE can ramp up output as logistical hurdles clear. As the holder of 25% of OPEC’s total spare capacity, the UAE’s departure is described as “a fundamental challenge to the group’s market-balancing mechanism”.

Economic outlook and GDP implications

Oil activity currently accounts for roughly 25% of the UAE’s total GDP. While the exit enables future growth, the immediate forecast is tempered by regional conflict.

After a 5.1% oil GDP expansion in 2025, analysts project a slight decline in 2026, with production reaching 3.65 Mb/d by the fourth quarter.

A 6% rebound in oil GDP is forecasted for 2027 as the UAE begins exercising its new production freedom. In a high-growth scenario where the country aggressively pursues its 5 Mb/d target, oil GDP could theoretically surge by over 20%.

Still, the report notes that the UAE is likely to adopt a “measured and market-conscious approach” to avoid triggering a total price collapse.

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