A couple of days ago, the United Arab Emirates announced that it will formally leave OPEC on May 1, with the Middle East oil giant becoming the latest country to cut ties with the organization in recent years. The UAE is among the world’s leading oil producers and OPEC’s third-largest, trailing only Saudi Arabia and Iraq. The UAE is ostensibly leaving the cartel, driven by a desire to capitalize on oil assets before the peak transition to renewable energy, with the country looking to bypass OPEC production constraints and boost oil output to 5 million barrels per day (bpd) by 2027 from around 3.4 mb/d currently. The exit allows the country more flexibility to set its own strategic, economic, and regional policies, including independent relations with key customers like China and the United States.
However, experts warn that the UAE’s departure could significantly weaken OPEC and its ability to control oil prices, potentially negatively impacting Africa’s Oil & Gas giants.
Historically, OPEC provided price stability through coordinated cuts. The UAE’s departure significantly limits the cartel’s influence over global supplies, shifting the advantage to lower-cost producers and potentially causing structural erosion of OPEC’s market-steering capability. With the UAE–one of the few members with significant spare capacity–gone, the group’s influence is diminished, leaving African producers more exposed to raw market forces. Indeed, the UAE’s radical move is expected to reshape the competitive landscape for African oil-dependent economies like Nigeria, Algeria, Congo, Equatorial Guinea, Gabon, and Libya.
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Unconstrained by OPEC quotas, the UAE plans to increase production by nearly 50% in the short space of a year or two, with EnergyInc Advisors noting that UAE crude is often cheaper to produce and cleaner to refine, putting direct pressure on African barrels. UAE oil, particularly from Abu Dhabi, is often located near the surface, allowing for very low-cost extraction compared to many African nations that struggle with higher operating expenses, aging infrastructure, and limited investment. UAE crude grades such as Murban are light and low in sulfur, making them easier and cheaper to refine into high-value products like gasoline and jet fuel. In contrast, some African crudes require more complex and costly refining. As the UAE increases production towards its 5 million barrels-per-day capacity target, it will be competing for the same Asian and European markets that top African producers like Nigeria and Angola rely on.
The analysts have warned that a potential oil price war could turn into a race to the bottom, leading to a structural decline in oil prices as producers ramp up production in a bid to grab more market share. Lower global prices could lead to tighter fiscal conditions and currency pressures for African producers like Nigeria, with higher breakeven points, with Africa’s leading oil producer needing oil prices around $75 per barrel to balance its budget. Oil accounts for over 80% of Nigeria’s foreign exchange inflows and roughly 90% of export earnings, with lower oil prices likely to trigger significant fiscal deficits, currency depreciation, and reduced capacity to fund public expenditures. The West African nation has managed to stem a long-term decline in oil output, boosting production to ~1.7 million barrels per day from previous lows just above 1 mb/d, thanks to policy reforms, improved security, and growing international demand.
Additionally, the recent spate of OPEC departures suggests that the famous domino effect could be at play here, with five countries leaving the organization over the past decade, including Indonesia (2016), Qatar (2019), Ecuador (2020) Angola (2024) and now the UAE. Other frustrated African members may be tempted to also prioritize national output over collective restrictions, especially if the UAE successfully gains market share outside the cartel.
That said, in the short term, ongoing geopolitical disruptions led by the war in Iran and closure of the State of Hormuz have already slashed Gulf exports, creating a temporary supply gap that African producers with spare capacity could theoretically exploit.
With the largest proven oil reserves in Africa (~48.3 billion barrels), Libya is considered to have the most significant potential for rapid production increases, though its output is highly volatile due to political instability and security threats. Nigeria has the theoretical capacity to produce more; unfortunately, aging infrastructure, vandalism and persistent insecurity have frequently prevented it from capitalizing on its massive reserves.
Further, Africa could benefit from more investments if the UAE seeks to expand its influence in Africa once it leaves OPEC, mainly through direct bilateral energy partnerships and downstream investments in African infrastructure such as refineries. The UAE committed over $110 billion in investments across Africa between 2019-2023, positioning it as one of the continent’s top strategic partners alongside the US, China and the EU. Of this total, more than $70 billion was directed toward the energy sector, with a heavy emphasis on green and renewable energy projects.
By Alex Kimani for Oilprice.com
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