UAE’s OPEC exit may open doors for cheaper, more secure oil supply to India

The United Arab Emirates’ (UAE) decision to leave the Organisation of the Petroleum Exporting Countries (OPEC) after five decades of membership may not be good for the alliance, but it can open doors for a cheaper and more secure oil supply to India.

Experts believe that the UAE may offer oil at discounted prices to India considering its diplomatic ties and increasing bilateral trade between the countries. The UAE is the second-largest trade partner of India.

On April 28, the UAE announced its exit from OPEC and OPEC+, effective from May 1. The UAE was a member of OPEC for nearly six decades, joining in 1967. Over time, tensions grew as the UAE expanded its production capacity to about 5 million barrels per day (bpd), while OPEC capped output at around 3.5 mbpd, leaving nearly 1.5 mbpd underutilised. The UAE, which had invested heavily to boost capacity, increasingly pushed for higher quotas, arguing that its baseline did not reflect its actual capability.

Furthermore, the differences with Saudi Arabia also widened, as Riyadh focused on limiting supply to support prices while the UAE pushed for higher output to gain market share. These tensions, along with broader regional divergences, built up over time, with the U.S.–Iran tensions and blockade of the Strait of Hormuz acting as a trigger by underscoring supply risks and the need for flexibility.

“The UAE has the capacity to produce around 5 million barrels of oil per day, but production was earlier capped at about 3.5 mbpd under the OPEC framework. If the UAE ramps up output, it will need to expand exports and secure more buyers, which could work in India’s favour,” said Vinay K Srivastava, global affairs expert and Professor of Finance at ITS Ghaziabad, told Fortune India.

“The UAE’s decision to exit from OPEC reflects a policy-driven evolution aligned with long-term market fundamentals,” UAE’s Minister of Energy and Infrastructure, Suhail Mohamed Al Mazrouei, had said.

Before its exit, the UAE was among the three largest producers in the Organisation of the Petroleum Exporting Countries, accounting for about 12% of the group’s total output. Furthermore, the country contributes roughly 8%–9% of global crude oil exports.

The UAE’s exit from OPEC is seen as a significant blow to the oil-exporting group and a counter to Saudi Arabia, which has been the de facto leader of the cartel for decades.

“The UAE's exit is momentous. However, it's not entirely surprising as political tensions between the UAE and Saudi Arabia have been building over the last few years and have intensified in recent months amid the ongoing conflict in Iran,” Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, said.

How can India tap the UAE’s post-OPEC output?

UAE and India have been strong trade partners for decades. For instance, bilateral trade between the two countries grew by about 100%, rising from $49.75 billion in FY 2015–16 to nearly $100 billion in FY 2024–25.

Apart from overall trade, India’s oil trade with the UAE has also increased significantly over the past decade. For example, oil imports from the UAE rose by around 34%, from 0.35 mbpd in 2014 to 0.47 mbpd in 2024.

Notably, after Russia, Iraq, and Saudi Arabia, the UAE is the fourth-largest oil supplier to India, with annual supplies of about 155–165 million barrels, accounting for roughly 11% of India’s total oil imports.

“India is already in consultation with the UAE on oil trade in rupees. If such transactions are carried out, it could help ease pressure on foreign exchange reserves and reduce currency-related stress. This move may materialise, given that both sides had earlier indicated a willingness to explore rupee-based trade,” added Srivastava.

Habshan–Fujairah pipeline: A safer oil route for India 

The UAE also has the Habshan–Fujairah pipeline, also called the Abu Dhabi Crude Oil Pipeline. It is a crucial onshore crude oil pipeline project that links the Habshan inland oil fields in Abu Dhabi to the export terminal located at Fujairah, situated on the Gulf of Oman. The 360–370 km-long pipeline is estimated to have been commissioned in 2012, with a capacity of 1.5–2 million barrels per day.

According to experts, the pipeline presents definite benefits for India. Firstly, it avoids the strategically vital but often turbulent Strait of Hormuz. Secondly, faster deliveries from the Fujairah terminal will help overcome any logistical challenges, ensuring more efficient transportation.

“Considering the plans of the UAE to increase production and exports, this pipeline infrastructure can prove invaluable for India in ensuring its energy security by securing greater quantities of crude oil,” experts said.