Economic Highlights

New Delhi, 4 May 2026

UAE’s OPEC Exit, Higher Oil Risks

STRATEGIC WARNING FOR INDIA

By Shivaji Sarkar 

None, not even US analysers, expected that a “non-descript war” with a small country like Iran could change the global energy scenario, that America is keen on monopolising. 

The US plans a conflict decades before as it had envisioned the 1969 Camp David accord with Egypt in a 1951 US congressional study. In 2026, its battle for supremacy is deeply hurt by Iranian strategies and devastation of the US assets in 13 the Gulf countries. 

Now the OPEC seems to be in crisis, if not collapsing. The United Arab Emirates has decided to leave from May 1 and the American dollar-sale accord with Saudi Arabia ended in 2024. The Saudis have shown inclination for trading in the Chinese Yuan and had expressed its desire to be part of BRICS, though stalled for now. India is the BRICS chairman for the current year.

It means the US could lose in trillions of dollars of transactions and if its NATO allies reach a peace deal with Russia, not unexpected, the global power scenario may shift faster than imagined. 

For India, the UAEs’ decision to leave OPEC is not just a Gulf political story—it is about fuel prices, inflation, the rupee, and economic stability. As also having higher petroleum reserves.India imports nearly 85 percent of its crude oil needs. India purchased 245.3 million tonnes (MT) of crude in 2025-26 Finat 243.2 MT in 2024-25. Any rise in global oil prices directly raises petrol, diesel, transport costs, fertiliser prices, and food inflation. With Brent crude already crossing $110 per barrel due to the US-Israel war on Iran and disruption in the Strait of Hormuz, the UAE’s exit from OPEC adds another layer of uncertainty. 

At first glance, more oil from the UAE could help India by reducing prices. But in the short term, it may increase volatility because the move weakens OPEC’s ability to manage supply and prices. For India, the real concern is not only oil availability but unstable and unpredictable pricing.Crucial international negotiations at diplomatic and commercial level decides the oil availability. India is deft at it but in the conflict situation it calls for swift alternative action.  

The UAE, the fourth-largest producer in OPEC, has announced it will leave both OPEC and OPEC+ after nearly 60 years of membership. OPEC was formed in 1960 by Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela to protect oil-exporting countries by controlling production and keeping prices stable. The UAE joined in 1967. For decades, OPEC had enormous power over the global oil market. 

That power scenario is changing. At one time, OPEC controlled more than 50 percent of global oil output. Today, its direct share has fallen to around 30 percent because of rising production from the United States, Brazil, and other independent producers. To recover influence, OPEC joined with Russia and others in 2016 to create OPEC+, controlling nearly half of world oil production. 

The UAE produces around 3.4 million barrels of oil per day and can increase output to nearly 5 million barrels per day after investing almost $150 billion in expanding capacity. Abu Dhabi had long demanded a bigger production quota inside OPEC to match this capacity. Saudi Arabia resisted because it wanted tighter supply to keep oil prices high. 

The UAE wants to sell more oil while demand remains strong. Saudi Arabia prefers production discipline to defend prices. This difference became sharper after the Iran war damaged Gulf energy infrastructure and exposed political differences between the two countries.Iranian strikes hit UAE facilities like the Ruwais refinery and Fujairah export terminal. The Strait of Hormuz, through which nearly one-fourth of global oil moves, became a major risk zone. In such conditions, the UAE wanted flexibility, not restrictions.Outside OPEC, it can pump more oil and sell freely. 

The UAE is the biggest producer to leave in recent years. Angola exited in 2024, Ecuador in 2020, and Qatar in 2019, but none had the UAE’s size or importance.Saudi Arabia will now have to do most of the work of balancing the market with major spare capacity—up to 12.5 million barrels per day—but it has kept production below 10 million to support prices.Iraq, the third-largest OPEC producer, says it has no plans to leave because it wants stable prices. Iran is also likely to stay because OPEC gives diplomatic weight beyond oil. 

The US is now OPEC’s biggest rival. Once dependent on Gulf oil, America now produces nearly 20 percent of global oil through its shale boom and control now over Venezuela. Brazil and others are also expanding output.US President Donald Trump has repeatedly attacked OPEC, accusing it of keeping prices artificially high and harming consumers. He has demanded lower oil prices and even threatened tariffs and reduced military support for Gulf allies.Abu Dhabi has grown closer to the US and Israel in recent years. By leaving OPEC, it gets more freedom to align its oil policy with market demand and American strategic interests rather than Saudi priorities. 

The US is strengthening defence ties not only with Gulf states like the UAE but also with Indo-Pacific partners such as Indonesia to secure global trade routes.Indonesia matters because it sits near key maritime routes linking the Indian and Pacific Oceans. Stronger US-Indonesia military cooperation supports protection of shipping lanes, especially when the Strait of Hormuz and Red Sea face threats. For India, both routes are vital for oil imports.Greater strategic competition can turn energy routes into conflict zones. 

For India, the short-term pain is clear. Higher crude prices increase the import bill, weaken the rupee, and raise inflation. Every jump in oil prices affects transport, electricity, fertilisers, and household budgets. It also pressures government finances and the Reserve Bank of India. 

If the UAE increases output beyond former OPEC limits, more supply could soften global prices. Since the UAE is a low-cost producer, it can profit even at lower prices. This could reduce India’s fuel costs and inflation pressure.Fujairah Port also gives strategic advantage because some exports can bypass the Strait of Hormuz, reducing shipping risks. Direct deals with the UAE may also improve pricing flexibility for India. 

Still, immediate relief should not be expected. War damage, shipping disruption, insurance costs, and tanker risks will keep markets nervous. The UAE cannot suddenly flood the world with cheap oil.OPEC is not collapsing, but its authority is weakening. Chinese role in Pakistan-US-Iran talks remains strong. India so far is a bystander amid more oil shocks.---INFA

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