UAE Withdraws from OPEC: Implications for Global Oil Prices and Currency Markets

UAE's Exit from OPEC Could Be Bearish for Oil Prices

The United Arab Emirates' reported exit from the Organisation of the Petroleum Exporting Countries (OPEC) could have a negative impact on oil prices once supply conditions normalize in West Asia, according to Anindya Banerjee, Head of Research for Currency and Commodities at Kotak Securities.

Banerjee noted that the UAE is currently producing close to 5 million barrels per day and aims to sustain that level by the end of 2027. Once the situation normalizes in West Asia and oil begins to flow, the UAE stepping out of OPEC will likely be bearish for oil prices.

The development is also linked to broader shifts in global trade settlement patterns, with Banerjee suggesting that it is a step towards the ongoing de-dollarization process happening globally. Over time, more countries in West Asia could consider selling oil and gas in currencies other than the US dollar.

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India-UAE Ties Expanding Across Sectors

The implications for India are significant, with Banerjee noting that strategic ties between New Delhi and Abu Dhabi have expanded across sectors in recent years. The UAE and India have become strategic partners across various sectors, and the oil-for-rupee program will gain momentum.

Banerjee added that closer economic coordination between Asian and West Asian countries reflects an emerging multipolar global order. The UAE is one of OPEC's larger producers and has invested heavily in expanding production capacity over the past several years through state-owned Abu Dhabi National Oil Company.

OPEC's Supply-Management Framework

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The UAE's output strategy has often drawn attention because the country has simultaneously pursued capacity expansion while remaining part of OPEC's supply-management framework, under which member countries coordinate production targets to influence market balance. OPEC, led by Saudi Arabia, has historically managed supply through coordinated quotas. In recent years, the wider OPEC+ alliance, which includes Russia and other producers, has played a larger role in setting output policy.

India's Currency Trade Push

India has in recent years expanded efforts to settle some international trade in local currencies, including the rupee, as policymakers seek to widen payment options for importers and exporters. The UAE has emerged as one of India's key strategic and commercial partners.

The two countries signed the Comprehensive Economic Partnership Agreement, which reduced tariffs and aimed to increase bilateral trade. Energy remains central to the relationship, with the UAE among India's important crude suppliers and investment partners in infrastructure, logistics, and renewable energy.