By Enyichukwu Enemanna
The United Arab Emirates (UAE) says it is taking exit from the groups of major oil producing nations, the OPEC and OPEC+ next month, nearly six decades of holding the organisation’s membership.
The move will assist in meeting its growing global energy demand in the long-term after recent investments to boost its production capacity, UAE said in explaining its decision.
UAE’s exit is viewed as a setback on the cartel, with an analyst describing it as “the beginning of the end of OPEC”.
The Gulf state’s energy minister said being a country with no obligation under the groups would give it more flexibility.
OPEC was formed in 1960 by five countries, including Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Its aim has been to co-ordinate production to provide steady revenue for its members.
The number of countries in the cartel has increased over the years, but in addition to the five founding members are Algeria, Equatorial Guinea, Gabon, Libya, Nigeria and the Republic of the Congo.
The UAE joined in 1967, and its departure will leave the organisation with 11 members. There are additional 10 non-OPEC members in the wider OPEC+ alliance.
Saul Kavonic, head of energy research at MST Financial, said it was “the beginning of the end of Opec”.
“With the UAE leaving, Opec loses about 15% of its capacity and one of its most compliant members.”
The UAE’s decision came as the World Bank warned the war in the Middle East has caused the biggest loss of oil supply on record.
Energy prices will rise by about a quarter on average as a result this year, it said, while it could take six months for shipping through the key Strait of Hormuz to return to pre-war levels.
“The poorest people, who spend the highest share of their income on food and fuels, will be hit the hardest,” the World Bank’s chief economist Indermit Gill said.
According to analysts, UAE’s decision to leave OPEC will not have an immediate impact on global energy supply, due to the ongoing closure of the Strait of Hormuz, but could lead to a longer-term boost in output.
The country has invested heavily in boosting its production capacity and has wanted for a long time to pump more oil, economists said.
Dr Carole Nakhle, chief executive of Crystol Energy and secretary general of the Arab Energy Club, told the BBC the UAE’s decision “has been a long time in the making”.
“Abu Dhabi has pursued ambitious production capacity growth, yet often felt constrained by group quotas, especially amid uneven compliance by some members,” she said.
Earlier, an African top oil producer, Angola had announced its exit from the cartel.
