Geline Salac

What is OPEC, and how does it impact consumers?

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Reuters Wires

The United Arab Emirates said on Tuesday (April 28) it was quitting OPEC and OPEC+, dealing a heavy blow to the oil exporting groups and their de facto leader, Saudi Arabia, at a time when the Iran war has caused a historic energy shock and rattled the global economy.But what is OPEC, and how does it impact consumers?<div>WHAT IS OPEC</div>Founded in 1960, the Organisation of the Petroleum Exporting Countries (OPEC) is a bloc formed of oil-exporting nations, who coordination their oil and gas policies as a means of managing the oil market. The founding members were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, but as of 2016, the group has expanded to include 23 countries, who now make up the OPEC+ Alliance. The bloc controls slightly over 50% of global crude production, Jorge Leon, head of geopolitical analysis at Rystad Energy, told Reuters. <div>WHAT IS THE PURPOSE OF OPEC</div>OPEC&#x27;s main purpose is to reduce volatility in oil markets, Leon said. He used the example of the COVID-19 pandemic, when oil demand dropped by 20 million barrels a day. The group reduced supply by 10 million barrels to stabilise the market. &quot;These are historical examples that show how OPEC and OPEC+ have managed to manage the market, moving supply from one period to another,&quot; he said. <div>WHY IS UAE LEAVING </div>The loss of the UAE, a longstanding OPEC member, could weaken the group, which has usually sought to show a united front despite internal disagreements over geopolitics and production quotas.So why have they left? Leon said it comes down to incentives. Being part of a bloc that exists within a growing market is one thing, but when that market shrinks, the incentives shrink as well. &quot;If you&#x27;re part of a cartel that operates in a shrinking market, then the incentives to remain in the group are less and less&quot; Leon said. &quot;It&#x27;s more about who moves first. And right now, it seems like the UAE has taken that step.&quot;<div>WHAT IMPACT WILL IT HAVE</div>In the short term, Leon said the impact would be minimal.&quot;Because of the Strait of Hormuz being closed, any additional supply coming from the UAE is quite restrictive at the moment,&quot; he explained. Once the strait reopens however, the UAE will likely rush to increase oil production and make use of their spare capacity. &quot;They will start pumping as much as they can to reach those five million barrels per day. So in reality, what it means is that there&#x27;s more supply to the market in the medium term,&quot; he said. <div>WHAT HAPPENS TO OPEC NOW </div>&quot;It really puts a question mark on the future of OPEC and OPEC+ as a cohesive organization,&quot; Leon said, adding that all eyes will now be on Saudi Arabia. As the &quot;central banker&quot; of the oil market, will they continue to take the reins and manage the market? Or will the market become more of a free-for-all? &quot;That is the big question at the moment,&quot; Leon said. (Production: Hannah Ellison)

EXPLAINER: The UAE has left OPEC - but what is the bloc it's quitting?

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EXPLAINER: The UAE has left OPEC - but what is the bloc it's quitting?

Reuters

Published April 29, 2026 06:55 AM PHT

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