OPEC’s influence on global oil prices has narrowed sharply after the United Arab Emirates announced its departure from the cartel, reducing the group’s share of world supply to just over 20 percent. The move follows a broader decline in OPEC’s market power that began with the U.S. shale boom and intensified during the 2023 Iran conflict.

Before 1960, oil prices were set by the Seven Sisters—major Western oil majors that dominated reserves and sales. OPEC was created in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela to shift leverage toward producing nations. While the cartel peaked in the 1970s, its ability to enforce quotas has waned as production spreads worldwide.

In May, OPEC members raised production quotas by 206,000 barrels per day to counter supply shocks, yet the Strait of Hormuz remains effectively closed, limiting the impact of any output changes. Even with the UAE’s exit, OPEC still controls a sizeable portion of the market, but its coordination power is increasingly challenged by independent producers.

For investors, the shrinking OPEC footprint signals heightened volatility in crude prices and a potential shift toward greater market fragmentation. Energy firms must now navigate a landscape where supply decisions are less predictable and geopolitical events can quickly disrupt traditional cartel dynamics.