New Delhi [India], May 1 : The United Arab Emirates' (UAE) decision to exit the Organization of the Petroleum Exporting Countries (OPEC) may have far-reaching implications for global energy markets, potentially reshaping supply strategies and price dynamics, according to a sector update report by ICICI Securities.
The report described the move as a major shift in the global oil landscape, ending a decades-old production alignment within the cartel. "The UAE's announcement of its formal exit from OPEC... breaks a 65-year-old system of the OPEC cartel," it said, adding that the development could weaken the group's ability to manage oil supply cohesively.
ICICI Securities noted that while the immediate impact may remain limited due to ongoing disruptions in the Strait of Hormuz, the long-term outlook points to increased production from the UAE. The country has already built significant spare capacity, which could enter global markets once logistical constraints ease.
"We believe this move may help soften prices in the longer term, although volatility in the markets may spike owing to lower cohesive supply management from OPEC," the report added.
The report also flagged broader implications for the cartel, suggesting that the UAE's exit could prompt other member nations to reassess the benefits of remaining within OPEC, particularly amid declining revenues and geopolitical disruptions.
Despite this structural shift, crude prices are expected to stay elevated in the near term due to supply bottlenecks. "Crude prices likely persisting at USD 85/bbl levels over the next 9-12 months. But, the long-term direction of prices may be that of moderation, which is a positive for downstream players, viz. the three OMCs," it said, citing continued constraints in oil flows through key transit routes.
From India's perspective, the evolving dynamics present a mixed picture. While firm prices in the near term may keep import costs high, a potential moderation in crude prices over the longer term could benefit downstream oil marketing companies.
The report concludes that the UAE's exit signals a possible turning point in global energy coordination, with significant implications for market stability and future pricing trends.
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