The United Arab Emirates (UAE) has said it is quitting the Opec and Opec+ groups of major oil producing nations after nearly 60 years.
The UAE said the decision reflected its “long-term strategic and economic vision and evolving energy profile”.
The decision is seen as a blow to the cartel with one analyst describing the exit 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 provide more flexibility.
Opec was formed in 1960 by five countries – Iran, Iraq, Kuwait, Saudi Arabia and Venezuela – and its aim has been to co-ordinate production to provide steady revenue for its members.
The number of countries in the cartel has fluctuated over the years, but 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.
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 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.
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.
Nakhle added that Iran’s actions as an Opec member were likely to have reinforced the UAE’s decision.
According to the latest figures from Opec, UAE produces 2.9 million barrels of oil a day. Saudi Arabia, the de facto leader of Opec, produces nine million barrels of oil.
“Saudi Arabia will struggle to keep the rest of Opec together, and effectively have to do most of the heavy lifting regarding internal compliance and market management on its own,” Kavonic said, adding other Opec members could follow suit.
“This present a fundamental geopolitical reshaping of the Middle East and oil markets,” he added.
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