The United Arab Emirates' (UAE) unexpected decision to withdraw from OPEC and OPEC+ could have far-reaching consequences, not only for global oil markets and prices but also for the relevance of producer cartels in an increasingly multipolar world. This move comes amid the ongoing blockade of the Strait of Hormuz, through which 20 percent of the world's oil supply passes, and the UAE's step, taken in what it calls its national interests, serves as a wake-up call for the oil market.
UAE's Exit Blindsides OPEC
Experts indicate that the UAE's exit, effective May 1, 2026, has completely caught OPEC off guard, particularly Saudi Arabia, which effectively controls the group. OPEC's power and ability to influence global oil markets have eroded over the years, and the UAE's departure raises critical questions about the group's relevance. Notably, OPEC has faced criticism from US President Donald Trump, who has accused it of 'ripping off the world' with higher oil prices.
While the OPEC and OPEC+ framework plays a crucial role in managing global oil supply, any potential shift by the UAE away from strict quota alignment signals a structural change in supply discipline, says Sourav Mitra, Partner – Oil & Gas at Grant Thornton Bharat. The UAE has been investing heavily to increase its production capacity to around 5 million barrels per day (bpd) by 2027, and greater production flexibility could lead to incremental supply in the global market. In the short term, this could exert downward pressure on crude prices, especially if it weakens coordinated production cuts, Mitra explains.
India Stands to Benefit
While the world order evolves and the UAE's decision impacts other major oil producers, India, which imports around 90 percent of its crude needs, may actually benefit. Data from Kpler, a global real-time data and analytics provider, shows that the UAE has consistently ranked among India's top five crude oil suppliers in recent years.
During FY 2024–25, the UAE supplied about 10 percent of India's crude oil imports, ranking among the top five suppliers. ICRA data indicates that in the first eleven months of FY2025-26, the UAE's share in India's oil imports rose to 10.6 percent. Traditionally, before the surge in discounted Russian crude post-2022, the UAE's share was higher, often in the 10–12 percent range, competing closely with suppliers like Iraq and Saudi Arabia. However, as Sourav Mitra notes, India's import basket has become more opportunistic and price-driven, with Russia emerging as the largest supplier (over 30–35 percent share in recent periods), thereby relatively reducing the UAE's proportion without affecting absolute volumes significantly. The UAE remains strategically important due to its geographic proximity, stable supply, and favorable logistics, he says.
How India May Benefit
As it looks to diversify its crude procurement sources and reduce dependency on a single source, India may actually benefit from the UAE's OPEC exit. Any increase in the UAE's crude oil production will directly strengthen India's energy security. Geographical proximity and lower transit times are major advantages of the UAE's oil for India. Hence, as Prashant Vashisht, Senior Vice President and Co-Group Head at ICRA, points out, a significant increase in UAE production would aid India in procuring higher volumes. “Accordingly, it is more beneficial for India to procure from West Asia than say US, Brazil due to the lower shipping time, freight costs etc.,” he tells TOI.
According to Sourav Mitra, in the short term, higher output translates into greater spot crude availability and potentially better pricing terms, especially due to lower freight costs and shorter delivery cycles compared to Atlantic Basin suppliers. There is also the question of looking for alternatives to Russian crude. India never stopped buying oil from Russia, but volumes reduced drastically at the start of the year as sanctions on some oil majors kicked in. While the US has temporarily waived sanctions amidst the Middle East conflict, the waiver will likely lapse in the coming days or months. Hence, more crude availability from the UAE works in India’s favor as it looks for alternatives to Russian crude to meet demands.
Sourav Mitra explains: In the long term, this becomes strategically critical as India evaluates alternatives to Russian crude in case of tightening sanctions by the United States or changes in geopolitical dynamics. “UAE offers a reliable, politically stable, and logistically efficient supply source, making it a viable substitute for a portion of Russian imports. Additionally, long-term contracts with UAE can help India reduce exposure to price volatility and geopolitical risks, ensuring a more balanced import portfolio,” Mitra tells TOI. Gaurav Moda, Partner and Energy Sector Leader at EY-Parthenon India, notes that India and the UAE have been stepping up bilateral ties. “In light of recent geopolitical events and UAE's decisions with regards to its energy priorities, it may open up space for larger bilateral partnerships between India and UAE, particularly in the energy as well as value-add space, given complementary demand-supply positions,” he told TOI.
India’s Petrochemical Ambitions Will Also Benefit
Yet another positive impact would be for India’s ambition to become a global petrochemicals manufacturing hub. Important for building a strong industrial base, increased UAE crude availability can positively support India’s petrochemical expansion strategy. India is aggressively investing in integrated refining-petrochemical complexes to meet rising domestic demand and reduce imports of chemicals. Mitra of Grant Thornton Bharat says that stable and diversified crude supply from UAE ensures feedstock security, which is crucial for such capital-intensive projects. “Moreover, UAE’s ability to supply specific crude grades compatible with Indian refineries enhances operational efficiency and margins. Over the long term, stronger energy ties with UAE could also extend into downstream partnerships, storage infrastructure, and strategic reserves, aligning with India’s ambition to become a global refining and petrochemical hub. This complements India’s broader goal of increasing the petrochemical intensity of its refining sector from ~13–18% toward global benchmarks,” he explains.
Prashant Vashisht says that India procures naphtha from West Asia and is setting up petrochemical capacities. “Any increase in crude sourcing or naphtha from West Asia would aid India's petrochemicals industry. Generally, along with crude, natural gas liquids production also ramps up, and if UAE increases crude production, there could be a possibility of higher natural gas liquids which have a fraction of naphtha as well,” he explains.
Oil-for-Rupee Trade May Gain Momentum
Yet another benefit could flow in the form of a rise in oil-for-rupee trade. Anindya Banerjee, Head of Research for Currency and Commodities at Kotak Securities, told ANI: “…because UAE and India have become strategic partners across various sectors... So I think the oil for rupee program will gain momentum.” He added, “Honestly, we see this as a step towards the ongoing de-dollarisation process, which is happening globally... we are seeing that structure is being unwound, is being reversed, and all these actions are in that direction...”
For India, energy security comes first when deciding which country to procure crude oil from. Whether it is Russia, Venezuela, the US, the UAE, or any Middle East country, India aims to diversify its crude sources to better manage supply in case of disruptions. Amid the ongoing Strait of Hormuz disruptions, the UAE and Saudi Arabia have actually been rerouting supplies to deliver crude to India. It is this reliability that India is looking to secure, and the UAE’s higher crude oil supply would work to India’s energy security advantage.
