The decision by the United Arab Emirates (UAE) to leave oil-producing cartel Opec points to a broader weakening of co-ordinated oil supply constraints, with potential benefits for import-dependent economies such as South Africa.
According to Andrew Herring, head of energy and power at UK-based risk and insurance company Marsh, the move shows structural shifts already under way in global oil markets in which Opec’s traditional ability to influence prices has been eroded by the rise of US shale production and increasing output from non-Opec producers, particularly in South America.
“This includes supply growth from countries such as Brazil and Guyana, which have become increasingly important sources of new global production in recent years,” said Herring.
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Opec operates as a group of major oil-producing countries aimed at co-ordinating production policy. Its largest members include Saudi Arabia, Iraq, Iran and Kuwait .
The UAE joined the organisation in 1967 through the Emirate of Abu Dhabi and remained a member after the formation of the UAE in 1971, positioning itself as part of the group’s long-standing efforts to manage global oil market stability.
Opec+ members, a wider group made up of Opec countries and allied producers such as Russia, operate under production quotas, which are agreed output limits that cap how much oil each country can produce in an effort to balance supply and support prices. These limits are adjusted through periodic negotiations, though compliance is often uneven. The UAE has repeatedly pushed for higher allowances, arguing that its production capacity has expanded.
“The UAE is likely to want to increase output in response to the current global oil market environment where Opec’s pricing power has weakened due to rising non-Opec supply and shifts in global production patterns,” Herring said.
The UAE’s exit was formally announced on April 28, with Abu Dhabi stating that the decision follows a “comprehensive review of its production policy and long-term strategic and economic priorities”.
According to the statement, the move reflects its “evolving energy profile, including accelerated investment in domestic energy production” and is intended to strengthen the UAE’s flexibility in responding to market dynamics. It added that the country will continue to act as a “responsible, reliable, and forward-looking” energy supplier.
The UAE said its focus will “now shift toward national interests, investors, customers and global energy markets”.
It also said it will continue to bring “cost-competitive and lower-carbon barrels” to market gradually and measuredly, aligned with demand conditions, while maintaining investment across oil, gas, renewables and low-carbon energy.
“The decision is less a sudden break and more a continuation of loosening discipline in the group, raising questions about how effectively producers can continue to co-ordinate supply,” said Herring. “For oil-importing economies such as South Africa, the impact may be supportive.”
“Higher output from producers operating outside strict quota systems could place downward pressure on global oil prices, easing fuel import costs for countries such as South Africa, which relies heavily on imported crude and refined fuel products,” said Herring.
For oil-importing economies such as South Africa, the impact may be supportive.
— Andrew Herring, head of energy and power at UK-based risk and insurance company Marsh
While weaker co-ordination among producers is often linked to higher volatility, Herring said oil markets are already experiencing large price swings, and that a more open supply environment may not make this worse.
“We’ve already seen significant volatility,” he said. “A more open market may actually reduce volatility.”
Yet price unpredictability remains a concern for businesses, particularly in energy-intensive sectors in which cost planning becomes more difficult.
David Fyfe, chief economist at London-based energy intelligence firm Argus Media, said the UAE’s exit formalises a shift that had been building for some time. He said Abu Dhabi has invested heavily to expand production capacity but faced limits on monetising that output under Opec restraint policies.
He said recent disruptions in the Middle East, including tensions affecting the Strait of Hormuz, temporarily tightened supply conditions and drew down inventories. “In that context the UAE may now have more flexibility to respond to demand swings as markets stabilise.”
He also pointed to broader uncertainty around the future of producer co-ordination, including whether countries such as Kazakhstan, Iraq and Iran will continue to adhere to output limits and whether a reopened Venezuelan oil sector would remain compatible with membership structures.
Herring said governments in importing countries should focus less on reacting to prices and more on improving resilience. “Diversification and reliability of supply are becoming more important.”
He said: “For South Africa, this means securing crude and fuel supplies from a wider range of international partners in a more fragmented global market, rather than relying on a limited set of suppliers.”
Diversification and reliability of supply are becoming more important.
— Andrew Herring
Herring added that longer-term shifts in the energy system could also help reduce exposure to oil price swings. “As electrification increases, particularly in transport, demand for oil is expected to fall over time, which could help limit volatility. At the same time, changes in global supply patterns are opening opportunities for new producers.”
For Africa, Herring said the environment presents more opportunity than risk. As global supply chains diversify, the continent could strengthen its position in energy markets, supported by a mix of renewable resources, gas reserves and favourable geography.
“In this context, the UAE’s exit from Opec is likely to accelerate a shift towards a more decentralised and competitive oil market, with potential benefits for import-reliant economies that adapt to changing supply dynamics.”
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