Oil market set for supply surge risk after UAE exit from OPEC: Goldman Sachs

The global oil market could face a significant supply overhang in the medium term following the United Arab Emirates’ decision to exit the Organization of the Petroleum Exporting Countries, Goldman Sachs said, warning that the move introduces fresh upside risks to production once current disruptions ease.

In a note released on Wednesday, Goldman said the UAE’s departure from OPEC and the broader OPEC+ alliance from May 1 weakens the group’s ability to tightly manage supply, even as near-term output remains constrained by geopolitical tensions in West Asia.

In the US, Donald Trump welcomed the UAE’s decision, saying it could help bring down oil and fuel prices over time. Speaking at the White House, Trump described the exit as “a good thing” and pointed to internal strains within OPEC.

Near-term tightness, medium-term glut risk

While the immediate impact on supply is limited, Goldman emphasised that the balance could shift sharply once logistical bottlenecks ease, particularly around the Strait of Hormuz, which has been disrupted by the ongoing Iran war.

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The bank expects UAE crude output to recover to around 3.8 million barrels per day by October 2026, up from about 3.6 million bpd before the conflict. However, it estimates the country’s production potential at more than 4.5 million bpd as early as February 2026 — suggesting room for a faster ramp-up outside OPEC quotas.

State-run Abu Dhabi National Oil Company is targeting production capacity of 5 million bpd by 2027, underlining the scale of future supply that could come online in a less coordinated market environment.

Goldman’s base case also factors in cumulative Gulf crude production losses of about 1.83 billion barrels through December 2026 due to ongoing disruptions. These losses are expected to tighten global inventories in the near term, before a potential replenishment cycle once export routes fully reopen.

Cartel cohesion under strain

The UAE’s decision is expected to dilute OPEC+’s grip on global oil supply and complicate efforts led by Saudi Arabia to stabilise prices. As the cartel’s fourth-largest producer, Abu Dhabi’s exit raises questions about the long-term cohesion of the alliance, especially as competition from non-OPEC producers continues to rise.

The timing of the exit, amid one of the most severe energy disruptions in recent years, adds to its significance. Oil prices rose more than 6 per cent on Wednesday as stalled US-Iran negotiations heightened concerns about prolonged supply disruptions across West Asia.

While the market remains tight for now, Goldman’s assessment suggests that the UAE’s newfound flexibility outside OPEC could accelerate supply growth once conditions stabilise, potentially capping future price rallies.

For large energy importers such as India, that shift could offer relief over time — but only after a period of continued volatility driven by conflict and supply uncertainty.