Goldman: UAE exit from OPEC introduces oil supply upside risk once Strait of Hormuz reopen
Goldman Sachs says the UAE’s OPEC exit poses greater medium-term than short-term oil supply upside risk, with UAE crude production potential estimated at just over 4.5 million bpd, constrained near-term by Hormuz closure.
Summary:
- Goldman Sachs said the UAE’s OPEC exit, effective May 1, poses a greater upside risk to oil supply over the medium term than the short term, as the Strait of Hormuz closure currently caps UAE output regardless of quota status
- The bank said the exit follows years of tension over the UAE’s production quota and comes in the context of the US-Israel war on Iran, in which the UAE has faced significant Iranian attacks despite Iran holding OPEC membership and quota exemption
- Goldman’s base case assumes UAE crude production recovers to 3.8 million bpd by October 2026, above the pre-war level of 3.6 million bpd, but the exit implies upside risk to that forecast
- The bank estimates the UAE’s potential crude production capacity at just over 4.5 million bpd as of February 2026, with ADNOC formally targeting 5 million bpd by 2027
- Goldman’s base case models cumulative Gulf crude production losses of 1.83 billion barrels by December 2026, with global oil inventories needing replenishment once the Strait reopens
- Oil prices surged more than 6% on Wednesday as deadlocked US-Iran negotiations heightened concern over prolonged supply disruption
- The UAE produced 3.4 million bpd before the war but output slumped by nearly half to around 1.9 million bpd in March following the Hormuz closure, according to data cited by The National
Goldman Sachs has assessed the UAE’s departure from OPEC and OPEC+ as a medium-term rather than short-term supply risk, with the effective closure of the Strait of Hormuz insulating oil markets from any immediate increase in Abu Dhabi’s output even as the emirate sheds the quota constraints that had held its production well below capacity for years.
The UAE confirmed on Tuesday that it would exit the producer group with effect from May 1, ending a membership that dates to Abu Dhabi’s joining in 1967, four years before the UAE was formally constituted as a country. The decision, framed by Abu Dhabi as a matter of national interest and long-term strategic alignment, follows sustained friction with OPEC over production quotas that had capped UAE output at roughly 3.2 million bpd under the broader OPEC+ framework, against a current production capacity of approximately 4.85 million bpd built through a $150 billion ADNOC investment programme. In effect, the UAE had been producing close to 30% below its physical ceiling as an OPEC member, a gap that had become increasingly difficult to justify as ADNOC accelerated its expansion timetable and the Iran war removed any remaining diplomatic incentive for restraint.
Goldman said the exit follows years of quota discussions and arrives at a moment of acute geopolitical stress, with the UAE having absorbed significant Iranian attacks during the conflict despite Iran retaining OPEC membership and operating under a quota exemption. The bank’s core observation is that the Hormuz closure currently dominates the supply picture. UAE crude production, which stood at 3.4 million bpd before the war, slumped to roughly 1.9 million bpd in March as export routes through the strait were disrupted, though the Fujairah terminal on the Gulf of Oman has provided a partial alternative corridor. Until freedom of navigation is restored through Hormuz, the formal removal of quota obligations changes little in terms of barrels reaching the market.
The medium-term calculus is different. Goldman’s base case has UAE crude production recovering to 3.8 million bpd by October 2026, already above the pre-war level of 3.6 million bpd, but the bank explicitly flags upside risk to that figure now that quota constraints have been removed. Its estimate of UAE production potential sits at just over 4.5 million bpd, a figure consistent with Rystad Energy’s assessment that ADNOC could reach that level within 12 months of quota removal if export routes are available. ADNOC’s own publicly stated target of 5 million bpd by 2027 sets the longer-range ceiling, a goal the company has brought forward from an earlier 2030 timeline on the back of sustained capital investment.
Goldman’s broader base case models cumulative Gulf crude production losses of 1.83 billion barrels through December 2026, with global oil inventories requiring replenishment once the Strait eventually reopens. That inventory rebuild dynamic, combined with an unconstrained UAE production ramp, points to a period of significant supply addition in the post-war order, reinforcing the bank’s revised Q4 2026 Brent forecast of around $90 per barrel. That is well below the levels above $110 at which Brent was trading on Wednesday, when prices surged more than 6% as deadlocked US-Iran negotiations raised fears of prolonged disruption. The structural question hanging over markets is how quickly that gap between current elevated prices and post-war normalisation closes once the geopolitical situation resolves, and whether ADNOC’s ambitions accelerate or smooth that repricing.
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Goldman’s framing is precise: this is a medium-term supply event, not a short-term one. While Hormuz remains closed, Abu Dhabi cannot move materially more oil regardless of quota status, so the immediate price signal is institutional rather than physical. The bank’s base case already prices in cumulative Gulf crude losses of 1.83 billion barrels by December 2026 and assumes inventories will need rebuilding once the Strait reopens.
The medium-term ceiling is where the numbers become significant. Goldman estimates UAE production potential at just over 4.5 million bpd, against a pre-war output of 3.6 million bpd and a base-case recovery target of 3.8 million bpd by October 2026. ADNOC’s stated 5 million bpd target by 2027 gives that figure credibility. The combined effect of post-war inventory restocking and an unconstrained UAE ramp-up would add substantial barrels to the market, reinforcing Goldman’s revised Q4 2026 Brent forecast of around $90 per barrel, well below the $110-plus levels at which crude was trading on Wednesday.
This article was written by Eamonn Sheridan at investinglive.com.