Oil prices above $110 as UAE exits OPEC amid Hormuz

What changed and why the market is focused on May 1

The United Arab Emirates will exit the Organization of the Petroleum Exporting Countries (OPEC) and the broader OPEC+ alliance effective May 1, a surprise decision that comes as oil prices remain elevated. The timing matters because crude markets are already being shaped by conflict-linked disruptions in West Asia and constrained shipping routes around the Strait of Hormuz. Analysts broadly argue that the UAE’s move, by itself, is unlikely to deliver immediate relief to oil-importing economies. Instead, near-term pricing is still being set by supply insecurity, shipping risk, and the geopolitical premium embedded in futures.

The UAE’s departure ends nearly six decades of membership, according to Reuters. It also removes a key Gulf producer from the quota framework that OPEC+ uses to coordinate supply. But with Hormuz flows curtailed, several analysts believe the practical effect on physical barrels in the coming weeks will be limited.

Where oil prices stand right now

Oil prices have been holding above the psychologically important $100 to $110 range. Brent crude was quoted at $110.74 per barrel (as of 8 am in one update), while WTI was at $19.13. In Reuters pricing on Wednesday, Brent for June dipped 1 cent to $111.25 a barrel by 0413 GMT after seven straight sessions of gains. WTI for June fell 56 cents to $19.37 a barrel, after a prior session rise of 3.7%.

The broader trend remains upward since the war began in late February. One data point in the provided material says crude has surged nearly 52% from February 27 (a day before the war broke out) to around $111 per barrel now. That sharp move has been repeatedly linked by analysts to the Strait blockade and fears of prolonged supply constraints.

Why analysts expect elevated prices despite the UAE’s exit

Analysts at ASK Private Wealth said the closure of the Strait of Hormuz is the primary reason prices are likely to stay elevated. They described a market shaped by post-Hormuz supply disruption, geopolitical risk premia, and shipping vulnerability, where an OPEC exit does not automatically translate into more deliverable supply. They also flagged structural supports for crude, including chronic underinvestment in non-Gulf production and resilient demand, particularly from non-OECD Asia.

ASK Private Wealth also noted that reduced visible producer coordination can initially add to risk premium, especially when spare capacity across the system is at historical lows after the Iran conflict removed significant volumes from the market. Over the medium term, their note argued the cartel premium could fall and the trading range could widen, as the credibility premium attached to OPEC+ coordination gradually erodes.

What the UAE can and cannot do immediately

Several parts of the provided material converge on the same near-term constraint: even if the UAE wants to raise output, it may not be able to export significantly higher volumes right away because shipping routes remain disrupted. Reuters sources and analysts similarly said that for now there is not much the UAE can do to increase exports due to the effective closure of Hormuz.

Once supply routes stabilise, the UAE would be free from OPEC quotas and could raise production in line with capacity and market demand. Estimates cited in the material say Abu Dhabi National Oil Company (ADNOC) could raise output to over 4.5 million barrels per day, versus an OPEC+ quota of around 3.4 million barrels per day for the May 2026 period. Any increase is expected to be gradual, spread over 12 to 18 months, depending on demand conditions and market stability.

What it could mean for OPEC and OPEC+ cohesion

Reuters’ analysis said OPEC and its allies will lose some power over the oil market when the UAE leaves, but the rest of the alliance is likely to stick together and continue coordinating supply policy. At the same time, the UAE’s exit could weaken enforcement discipline inside the group, according to the supplied explainer: if other members prioritise their own output over agreed limits, OPEC’s effectiveness as a price-managing body could reduce.

Jorge Leon of Rystad Energy, quoted in the material, framed the longer-term implication as a structurally weaker OPEC because the UAE, alongside Saudi Arabia, is one of the few members with meaningful spare capacity. Sergey Vakulenko of Carnegie Russia Eurasia Center, also quoted, pointed to UAE and Saudi spare capacity as central to how OPEC has historically smoothed markets.

Market reactions: a small pullback, not a turning point

Reuters reported that prices eased slightly after a multi-day rally as investors digested the UAE decision. LSEG senior analyst Anh Pham said the move points to a stronger supply outlook once the country is free of quotas, but emphasised that the effect is not immediate because incremental barrels may not be deliverable during the Hormuz blockade. He described the move lower as more of a correction from earlier gains, with Brent still holding around $110.

Haitong Futures analyst Yang An, cited in Reuters, attributed the recent rise in oil prices primarily to the Strait blockade and said supply disruptions could worsen if the blockade is extended.

What this means for India: inflation and growth risks remain

VK Vijayakumar, chief investment strategist at Geojit Investments, said the UAE decision is unlikely to ease crude prices in the near term. He added that indications of a prolonged US-Iran standoff could keep prices elevated, and said Brent around $110 is negative for India. He also warned that as long as crude remains high, downside risk to India’s growth and upside risk to inflation will remain high.

Other India-focused comments in the provided material struck a mixed tone over different time frames. In the medium term, a freer UAE could increase supply flexibility, potentially softening crude prices and helping India’s import bill and inflation. But in the short term, high prices and volatility tied to geopolitics remain the dominant risk.

A risk case: stockpiles and $125-plus Brent

A more adverse scenario was outlined by Rabobank International analysts Florence Schmit and Joe DeLaura. They wrote that if the conflict is protracted, another month or two of closed flows could exhaust global stockpiles, forcing prices to levels that destroy demand. In that case, they see sustained Brent prices well above $125 per barrel, with meaningful downside risks to global GDP growth.

Key numbers to track

Why the story matters for markets

In the immediate term, the provided material points to one dominant driver: deliverable supply is constrained by shipping disruption, so headline policy shifts do not quickly translate into lower prices. That keeps the geopolitical premium in place, with market participants pricing in extended volatility rather than a clean mean reversion.

Over the longer term, the UAE’s exit introduces a second layer of uncertainty around coordination. If the move weakens production discipline, the “cartel premium” embedded in coordinated supply management could change, and the market could settle into a wider trading range. For India, the main takeaway is that near-term macro pressure from elevated crude remains, while the potential medium-term benefit depends on whether additional UAE supply can reach markets once routes normalise.

Conclusion

The UAE’s May 1 exit from OPEC and OPEC+ is a significant structural signal, but the near-term oil price path is still anchored to the Strait of Hormuz disruption and the broader US-Iran conflict backdrop. Traders are likely to keep focusing on shipping conditions, spare capacity constraints, and the pace at which Gulf exports normalise. Any meaningful supply response from the UAE, based on the estimates cited, appears more likely to play out gradually over the next 12 to 18 months rather than immediately after the exit date.