UAE exit fromOpec would raise oil supply,lower pricesfor ind

Alongside Saudi Arabia, the UAE holds meaningful spare capacity, the real lever Opec+ uses to move markets and stabilise prices.

The United Arab Emirates’ (UAE) exit from the Organisation of Petroleum Exporting Countries (Opec) could benefit India by increasing oil supply and lowering prices, analysts said.

On April 28, the UAE announced that it will exit both the 12-member Opec and the broader 22-member Opec+ alliance, amid the escalating conflict in West Asia, which has severely impacted global energy supplies.

“UAE’s departure from Opec could, over the medium term, make global oil supply more responsive, as the country would no longer be bound by production quotas. This added flexibility may exert some downward pressure on crude prices, offering relief to India through a lower import bill and easing inflationary pressures,” said Sourav Mitra, Partner – Oil and Gas, Grant Thornton Bharat.

The UAE accounts for around 3-4 percent of global oil supplies with plans to further increase its output.

“Around 3-4 percent of global supply going out of Opec implies that the ability to manoeuvre on prices and production is reducing for Opec,” Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, Icra, said.

He added that the UAE has plans to increase capacity to 5 million barrels per day (mbd) in 2027, and both moves, including fewer constraints due to exit from Opec and higher supply, given the country’s proximity to India, will help New Delhi.

Announcing the country’s exit, the Emirates’ energy ministry said, “This decision aligns with the UAE’s long-term strategic and economic vision and the evolution of its energy sector, including accelerating investment in domestic energy production, while reinforcing its commitment to its role as a responsible and reliable producer looking to the future of global energy markets. The decision takes effect on May 1.

Analysts and industry sources, however, said that this will play out once the geopolitical tensions subside.

“In the near term, such moves tend to unsettle markets and heighten geopolitical uncertainty. For India, this underscores the importance of continuing to diversify supply sources and deepening bilateral energy partnerships to manage potential disruptions,” Mitra said.

The real lever

Alongside Saudi Arabia, the UAE holds meaningful spare capacity, the real lever Opec+ uses to move markets and stabilise prices. UAE is the fourth-largest producer in the alliance with 4.8 million bpd capacity. “The UAE leaving Opec+ means one of the group’s core pillars is walking away. Take that out, and the system becomes structurally weaker,” said Jorge Leon, head of geopolitical analysis at Rystad Energy. Leon noted that the impact may be limited in the short term. The UAE, with ~4.8 mb/d o…

Vasisht said that given the UAE’s proximity to India, New Delhi could significantly ramp up purchases of oil from West Asia. India imports around 90 percent of its oil requirement. While Opec accounts for 40 percent of the country’s oil imports, the UAE alone accounts for about 10 percent of New Delhi’s oil purchases.

The ongoing conflict in West Asia and the simultaneous blockade of the Strait of Hormuz have impacted 20 percent of global oil supply and 50 percent of India’s energy imports.

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