What are OPEC and OPEC +, and why has the UAE quit?

The United Arab Emirates has announced its withdrawal from OPEC and the wider OPEC+ framework, removing a core pillar of one of the most influential groups in the energy world.

The Gulf country, with a capacity of approximately 4.8 million barrels per day and significant room to increase output, announced on Tuesday that it would quit the organisation to focus on “national interests”.

The move comes as the US-Israel war on Iran has sparked ⁠an historic energy shock.

Here’s a look the at the organisation’s history and role in the global economy:

When was OPEC established and why?

The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental organisation based in Vienna, Austria, that has the objective of coordinating and unifying petroleum policies among member states.

It was originally created at the Baghdad Conference in September 1960 by five oil-producing founding states, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.

At that time, global oil markets were dominated by a group of powerful Western oil companies, known as the “Seven Sisters,” which controlled production and set prices.

The broader aim of the founding countries was to assert sovereignty over their natural resources and secure fair and stable prices for petroleum producers, as well as regular supplies to consuming nations.

OPEC currently has 12 members, including, aside from the UAE: Algeria, Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, and Venezuela.

According to a statement issued on Tuesday, the UAE’s withdrawal will be effective on May 1, marking the exit of a member that had contributed to the organisation since 1967.

The organisation pursues price stability by setting agreed production quotas for the membership, which together controls about 30 percent of global supply.

Since 2016, OPEC has also cooperated with Russia, Azerbaijan, Kazakhstan, Bahrain, Brunei, Malaysia, Mexico, Oman, South Sudan, and Sudan through its OPEC+ framework, bringing its output to about 41 percent of global supply.

Why did the UAE leave OPEC and OPEC+?

Alongside Saudi Arabia, the UAE is one of the few OPEC members with meaningful spare capacity, which allows the organisation to respond to supply shocks.

However, nations with spare capacity may decide to cash out their reserves rather than use them to adjust the market.

The UAE’s assertive foreign policy approach has progressively isolated it from fellow OPEC members, especially Saudi Arabia, which disagrees with its positions on Yemen and elsewhere.