The Organization of the Petroleum Exporting Countries, a consortium of oil-exporting nations, finds itself on a slippery surface. The United Arab Emirates, the third-largest oil-producing member of OPEC, has decided to exit the group after six decades. The reasons that may have forced Abu Dhabi’s hand are illustrative and pivot on the strain in the UAE’s ties with Saudi Arabia. Abu Dhabi, for instance, has, over the decades, been keen on increasing the volume of its oil production. But OPEC’s restraining quotas — Riyadh endorses these — have held the UAE back. Old and new geopolitical factors are also at play in this context. Within the Gulf Cooperation Council, the UAE, which has borne a disproportionate share of Iran’s ferocious retaliation on account of the UAE hosting American bases, prefers a stronger response against Tehran. Ties between Riyadh and Abhu Dhabi have been further soured by the two nations supporting rival factions competing for power in Sudan and Yemen. The immediate impact of the UAE’s withdrawal from OPEC may not necessarily be economic: the market’s reaction has not been too volatile. But OPEC may find itself on unsteady ground. Already, the organisation has been hampered by exits: Qatar, Angola, Indonesia and Ecuador are no longer its members. Opec+'s share of global oil output also slipped to 44% in March. The ruptures and perceived loss in influence may reduce OPEC’s ability to influence oil prices. This, in turn, sheds light on the impact of embedded fault lines on cartels OPEC, certainly, is one.
The UAE is apparently keen on ramping up oil production to 5 million barrels per day by 2027. This opens up a window of opportunity for oil-dependent nations like India. Of India’s 85% crude imports, the UAE supplies around 8%-9% at present: there is now scope for New Delhi to enhance the UAE’s share. The bilateral framework is already in place; India’s refining capacities are an additional advantage. But New Delhi must take care to pursue a fine balancing act. This is because OPEC’s share in India’s imports is substantial: in 2024, OPEC's share of India's crude imports rose to 51.5%. The endeavour to widen the share of UAE must not offset India’s traditional robust relationships with Middle Eastern oil suppliers, especially at this moment of churn in West Asia.
