United Arab Emirates to quit oil cartel Opec

What is Opec?Opec was formed in 1960 by five countries - Iran, Iraq, Kuwait, Saudi Arabia and Venezuela - to defend the interests of major oil exporters by coordinating production to ensure steady revenue for its members.The number of countries in the cartel has fluctuated over the years. In addition to the five founding members it also includes Algeria, Equatorial Guinea, Gabon, Libya, Nigeria and the Republic of the Congo.The UAE joined in 1967, and its departure will leave the cartel with 11 members. There are an additional 10 non-Opec members in the wider Opec+ alliance, including Russia.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," said the World Bank's chief economist Indermit Gill.The 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.David Oxley, chief climate and commodities economist at Capital Economics, said its departure could lead to lower oil prices but higher volatility on the market in the coming decades. He added that while the UAE is small, the implications could be major if other member states leave, or countries such as Russia and Saudi Arabia decide to ramp up production as a result.According to the latest figures from Opec, the UAE produced 2.9 million barrels of oil a day in 2024. Saudi Arabia, Opec's de facto leader, produced nine million barrels per day.Experts suggested the UAE could boost oil production by around one million barrels per day outside of Opec. Professor David Elmes of Warwick Business School said the UAE has one of the lowest "break-even prices" for oil it extracts, nearly half that of Saudi Arabia, meaning it can still turn a profit on oil it sells even when prices are lower. "So the UAE wants to sell more and is less concerned with keeping prices high. Now they can do that," he said.