--- title: "UAE's Exit from OPEC Shocks Wall Street; Investment Banks Respond Swiftly: Limited Short-Term Impact, Downside Risks for Oil Prices in the Medium Term" type: "News" locale: "en" url: "https://longbridge.com/en/news/284456580.md" description: "Analysts from JPMorgan, UBS, and Bloomberg are highly aligned in their core assessment: Brent crude is unlikely to experience significant volatility in the short term, as the blockade of the Strait of Hormuz remains the primary bottleneck constraining Gulf energy exports. In the medium term, oil prices face downside risks and may decline as the situation in the Middle East normalizes. Bloomberg analysis suggests that while the previous price war in 2020 was fought between Saudi Arabia and Russia, the next one might unfold between Saudi Arabia and the UAE" datetime: "2026-04-28T22:10:52.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/284456580.md) - [en](https://longbridge.com/en/news/284456580.md) - [zh-HK](https://longbridge.com/zh-HK/news/284456580.md) --- # UAE's Exit from OPEC Shocks Wall Street; Investment Banks Respond Swiftly: Limited Short-Term Impact, Downside Risks for Oil Prices in the Medium Term Just hours after the UAE announced it would formally withdraw from OPEC on May 1, Wall Street began assessing the impact on energy markets in the coming weeks and months. **Analysts from JPMorgan, UBS, and Bloomberg are highly aligned in their core assessment: Brent crude is unlikely to experience significant volatility in the short term, as the blockade of the Strait of Hormuz remains the primary bottleneck constraining Gulf energy exports.** On Tuesday, spot prices reacted minimally to the news, falling just 1% from their intraday highs and still closing with a cumulative gain of 3% for the day. **However, clouds are gathering over the medium-term outlook for Brent.** Once a peace deal is reached between the US and Iran and shipping through the Strait of Hormuz returns to normal, the UAE will be free to expand production outside the OPEC quota system. This will bring a new shock to global crude supply, further weakening the oil cartel's ability to support prices, and increasing downside risks for Brent as Gulf exports normalize. The UAE's historic split from OPEC aligns with its long-term strategic and economic planning. This move reflects the evolution of the country's energy policy—enhancing flexibility to respond to market dynamics while continuing to maintain market stability in a responsible manner. The member, which joined the oil cartel nearly six decades ago and is now OPEC's third-largest producer, will formally depart on May 1 and may begin increasing crude production in the following months. JPMorgan analyst Ian Mitchell told clients: > The UAE has announced its withdrawal from OPEC. The short-term trajectory of crude oil prices will continue to be dominated by developments in the Strait of Hormuz, but this exit likely means that medium-term oil prices will be lower than previously expected, although the influencing factors are complex. > > Regarding profit-taking on long positions in European oil and gas stocks, it is better to act early than late. > > Mitchell cited a key statement made last year by UAE Energy Minister Suhail Mohamed al-Mazrouei: "If the market needs it, we can produce 6 million barrels per day." However, the official production increase target of 5 million barrels per day by 2027 remains unchanged. > > **Impact on Oil Prices – Limited in the Short Term, Greater Downward Pressure in the Medium Term Due to UAE Production Increases.** The immediate impact of this announcement on oil prices is limited—as long as the Strait of Hormuz remains blocked, the UAE cannot expand exports, and production increases are out of the question. > > **In the medium term, oil prices may decline as the situation in the Middle East normalizes, because the UAE will no longer be bound by OPEC quotas and can freely expand production.** However, the ultimate magnitude of the impact depends on several factors: > > - First, the UAE's current actual production level. > - Second, how quickly the gap between current (post-normalization) production and actual maximum capacity can be closed—the UAE pledged in its Tuesday statement to "continue to gradually increase market supply in a responsible manner, based on demand and market conditions." > - Third, the reaction of other OPEC members to the UAE's production expansion. However, Saudi Arabia and other members are unlikely to be willing to further cut production to make room for the UAE's output increases. Before the outbreak of the US-Iran conflict, the UAE's daily production in February was 3.4 million barrels. JPMorgan's pre-war forecast estimated the UAE's average daily production this year at approximately 3.9 million barrels, while the total production of the 12 OPEC countries was 28.9 million barrels per day, and the broader OPEC+ total production was 37.7 million barrels per day. UBS analyst Henri Patricot's preliminary assessment of the UAE's exit from OPEC mirrors JPMorgan's conclusion: with the strategic chokepoint of the Strait of Hormuz still blocked, the short-term impact on oil prices is limited; however, once Gulf exports return to normal and Abu Dhabi is free to expand production outside the quota system, the medium-term landscape will turn distinctly bearish. Patricot told clients: > **Limited short-term impact, downside risks for oil prices in the medium term.** > > Given that the timing and pace of the reopening of the Strait of Hormuz remain the primary drivers, we believe this announcement is unlikely to have a substantial impact on near-term oil prices. Currently, UAE exports are already at their maximum achievable limit, and production increases cannot be realized until the Hormuz route is fully open again. > > Looking further ahead, this announcement is likely bearish for oil prices. > > - Before the conflict erupted, the UAE's crude oil daily production was 3.6 million barrels, leaving a gap of nearly 1 million barrels to its capacity ceiling of 4.5 million barrels per day (estimated by UBS). Several new projects are about to come online, expected to raise the country's capacity to 5 million barrels per day by 2029. The Abu Dhabi National Oil Company stated that current capacity has reached 4.85 million barrels per day, with a target of reaching 5 million barrels per day by 2027. > - The UAE has never previously achieved a daily crude oil production exceeding 3.7 million barrels, but we believe that once the strait reopens, the country has the full capability to rapidly increase output if it chooses to do so. > - The UAE's statement indicates that its production increase may not immediately surge to maximum capacity. Additionally, rising geopolitical risks due to weakening cohesion within the Gulf Cooperation Council may partially offset the downward pressure on prices from increased production. > > The UAE is not the first member to leave OPEC—Qatar and Angola have departed in recent years. However, the UAE's exit poses a significant challenge to OPEC. > > - The UAE is a founding member of OPEC, joining shortly after its establishment in 1967 under the name of the Emirate of Abu Dhabi. It is the third-largest producer and holds the second-largest spare capacity among members, accounting for approximately 25% of OPEC's total spare capacity. The UAE's departure is likely to weaken OPEC's ability to manage the supply-demand balance in the oil market in the future, thereby increasing long-term oil price volatility. > - The risk of other OPEC members following suit will also rise. Apart from Saudi Arabia, no other member possesses spare capacity comparable to the UAE's, but countries such as Iraq already have plans to expand capacity in the coming years. > > Regarding long-term economic impacts, in a more extreme scenario (which we consider unlikely)—if the UAE rapidly increases production to 5 million barrels per day by the end of 2027, its oil-related GDP could jump by more than 20%. Javier Blas, a senior energy columnist at Bloomberg, shares the same view as JPMorgan and UBS: limited short-term impact on oil prices, but a bearish trend in the medium term: > The global oil market is currently experiencing an extreme supply shortage. > > But perhaps in a few weeks or months, it could face a flood: the Strait of Hormuz reopens, coinciding with the outbreak of a new price war. **The previous price war in 2020 was fought between Saudi Arabia and Russia. The next one might play out between neighbors—Riyadh and Abu Dhabi, on opposite sides.** The financial blog Zerohedge wrote that one thing is certain: once peace returns to the Middle East and shipping through the Strait of Hormuz normalizes, the UAE will be free to expand crude oil production outside the OPEC quota system. This will create medium-term oversupply pressure, potentially driving down Brent and WTI crude prices and pushing the energy market into a "long-term low oil price" pattern. The next question is whether Venezuela and other OPEC members will follow the UAE's lead. ### Related Stocks - [BP.UK](https://longbridge.com/en/quote/BP.UK.md) - [603353.CN](https://longbridge.com/en/quote/603353.CN.md) - [OXY.US](https://longbridge.com/en/quote/OXY.US.md) - [OIH.US](https://longbridge.com/en/quote/OIH.US.md) - [XOP.US](https://longbridge.com/en/quote/XOP.US.md) - [XES.US](https://longbridge.com/en/quote/XES.US.md) - [CRAK.US](https://longbridge.com/en/quote/CRAK.US.md) - [IXC.US](https://longbridge.com/en/quote/IXC.US.md) - [USO.US](https://longbridge.com/en/quote/USO.US.md) - [VDE.US](https://longbridge.com/en/quote/VDE.US.md) - [XLE.US](https://longbridge.com/en/quote/XLE.US.md) - [UCO.US](https://longbridge.com/en/quote/UCO.US.md) - [BNO.US](https://longbridge.com/en/quote/BNO.US.md) - [JPM.US](https://longbridge.com/en/quote/JPM.US.md) - [UBS.US](https://longbridge.com/en/quote/UBS.US.md) - [JPM-M.US](https://longbridge.com/en/quote/JPM-M.US.md) - [JPM-C.US](https://longbridge.com/en/quote/JPM-C.US.md) - [JPM-D.US](https://longbridge.com/en/quote/JPM-D.US.md) - [JPM-L.US](https://longbridge.com/en/quote/JPM-L.US.md) - [8634.JP](https://longbridge.com/en/quote/8634.JP.md) - [JPM-K.US](https://longbridge.com/en/quote/JPM-K.US.md) - [JPM-J.US](https://longbridge.com/en/quote/JPM-J.US.md) ## Related News & Research - [ROI-UAE exit strips OPEC of clout, risks bitter price war: Bousso](https://longbridge.com/en/news/284431283.md) - [UAE leaves OPEC and OPEC+ in huge blow to global oil producers' group](https://longbridge.com/en/news/284384272.md) - [Oil falls on UAE’s plan to exit OPEC, but Mideast tensions limit decline](https://longbridge.com/en/news/284469207.md) - [UAE To Exit OPEC After Nearly 60 Years](https://longbridge.com/en/news/284454514.md) - [Citi raises Brent forecast for 2026; sees $150 oil if Hormuz disruption persists](https://longbridge.com/en/news/284146793.md)