Abu dhabi: The United Arab Emirates' (UAE) exit from the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) is unlikely to destabilize the alliance in the near term. However, it may erode the production discipline that has long supported the group's ability to coordinate supply, said SPI Asset Management managing partner, Stephen Innes. He emphasized that the move does not change the fact that the Strait of Hormuz remains a critical chokepoint for global oil flows.

According to BERNAMA News Agency, the UAE has announced its exit from OPEC and its allies (OPEC+) effective May 1, citing national interests and long-term energy strategy. The move is seen as a significant blow to the oil-producing groups amid an ongoing energy shock linked to the conflict involving Iran.

Stephen Innes noted that the UAE stepping away doesn't break OPEC overnight, but it chips away at the one thing that has always mattered most: discipline. He mentioned that while the UAE wants the freedom to produce more and monetise its capacity, leaving OPEC removes that ceiling, marking a significant medium-term shift rather than a short-term one.

The current market conditions remain driven by disruption rather than abundance, particularly with the Strait of Hormuz remaining a key transit route. However, Innes pointed out that the outlook could shift once tensions ease and shipping normalises, with risks tilting towards oversupply in the medium term.

Innes said the UAE's move reflects both strategic and political considerations, including its long-term objective to gain greater flexibility in managing production and monetising capacity. He added that the exit also points to weakening cohesion within OPEC, raising questions about how effectively the group can maintain collective discipline going forward.

While the scenario of other members following the UAE's lead is not imminent, the possibility remains. Innes remarked that OPEC's grip is loosening, and this could encourage producers to place greater emphasis on market share over coordinated restraint. Several members have exited OPEC in recent years, including Indonesia (2016), Qatar (2019), Ecuador (2020), and Angola (2023).