OPEC Faces Potential Shrinkage as Iraq Considers Exit: What It Means for Global Oil Investors and Markets
LONDON — Iraq has signaled that it may consider leaving the Organization of the Petroleum Exporting Countries (OPEC) if its oil production quota is not increased, Reuters reported on Thursday, just weeks after the United Arab Emirates’ departure from the group.
Since late 2016, OPEC has collaborated with Russia and other non-member producers to regulate the oil market through output quotas in a wider coalition known as OPEC+. Before the Iran war, OPEC+ accounted for about half of the global oil supply. However, production is now constrained due to the conflict, which has led Gulf members to reduce output following the effective closure of the Strait of Hormuz.
Iraq, OPEC’s second-largest producer after Saudi Arabia and one of its five founding members, relies heavily on oil revenues. The ongoing Iran war has severely curtailed Iraq’s income by disrupting exports through the Strait of Hormuz. According to a senior Iraqi oil ministry official, the government is facing a financial crisis and is pushing for a significant increase in its OPEC production quota. While Iraq had at one point contemplated exiting OPEC, the current strategy is to remain in the organization while advocating for a higher quota.
For July, Iraq’s production quota is set at 4.378 million barrels per day, although actual output is well below this level due to the Hormuz disruptions. The official emphasized that Saudi Arabia and other OPEC allies must treat Iraq’s request with “the utmost seriousness,” warning that failure to do so could force Iraq to explore all available options. He added, however, that it is still “premature” to consider leaving the group.
The Iraqi oil ministry clarified on Thursday that reports of Iraq contemplating an OPEC exit do not reflect the official government stance. OPEC and Saudi officials did not immediately comment on the matter.
Data from OPEC showed Iraq’s oil production dropped from nearly 4.2 million barrels per day in February to 1.48 million barrels per day in May, primarily due to the Strait of Hormuz closure. An Iraqi government spokesperson confirmed efforts are underway to restore full export capacity and declined to comment further on quota adjustments or OPEC membership status. “Iraq is working to restore its full oil export capacity and aims to raise production to 7 million barrels per day in the coming years,” said Haider al Aboudi, an Iraqi spokesperson.
OPEC was founded at the Baghdad Conference in September 1960 by Saudi Arabia, Kuwait, Iran, Iraq, and Venezuela. Over the next decade, its membership expanded to include Qatar (1961), Indonesia (1962), Libya (1962), UAE (1967), Algeria (1969), Nigeria (1971), and Ecuador (1973).
A brief timeline highlights recent shifts in OPEC membership:
– June 25, 2026: Iraq weighs leaving OPEC if its quota is not raised, though it currently plans to remain while seeking an increase. An Iraqi departure would be a major loss given its founding status and production ranking before the Iran war.
– May 1, 2026: The United Arab Emirates formally suspended participation in OPEC production quotas, marking a significant setback for the group. UAE remains a member for 2026 and has attended some meetings post-exit announcement.
– January 1, 2024: Angola exited OPEC following a dispute over its production quota.
– January 1, 2020: Ecuador left OPEC due to financial difficulties and desire to increase oil output. Ecuador had previously suspended and rejoined membership.
– January 1, 2019: Qatar quit OPEC to concentrate on natural gas development.
– 2016: Indonesia suspended its membership again after reactivating it earlier that year.
The latest developments underscore the growing challenges OPEC faces as member countries reassess their roles amid geopolitical tensions and fluctuating oil markets.
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Iraq’s consideration to leave OPEC amid quota disputes highlights significant instability within the oil cartel, exacerbated by geopolitical disruptions like the Iran war and Strait of Hormuz closure. For businesses in Oman, this signals potential volatility in oil supply and prices, creating both risks in energy markets and opportunities for strategic investments in alternative energy or supply diversification. Smart investors should closely monitor OPEC dynamics and Iraq’s production trajectory, positioning themselves to capitalize on market shifts triggered by changing member participation.
