Iraq is applying pressure on the Organization of the Petroleum Exporting Countries (OPEC), with a senior official indicating the country will consider all available options if the group does not grant it a significantly higher production quota.
A senior Iraqi oil ministry official revealed on Thursday that if OPEC does not substantially increase Iraq's production quota, the country will be forced to consider all feasible alternatives. Other sources indicated that Iraqi officials have previously studied the possibility of leaving OPEC, though the current plan remains to stay within the organization while striving to secure a higher output allocation.
With the Strait of Hormuz reopened, hundreds of oil tankers that were previously stranded in the Persian Gulf are returning to the market carrying substantial supplies of Middle Eastern crude, and producers in the region are working to restore production capacity. However, the pace of recovery varies among producing nations.
Saudi Arabia and the United Arab Emirates, with their well-established infrastructure and mature technical conditions, are expected to largely restore production to pre-shutdown levels within weeks. Iraq's situation is considerably more complex.
Its southern exports are highly dependent on the Basra corridor, and prolonged shutdowns can easily lead to injection-production imbalances, with some aging oil fields potentially experiencing capacity declines that are difficult to quickly reverse. Industry assessments suggest it would take Iraq 6 to 12 months to fully restore to maximum production capacity, with the difficulty of the ramp-up increasing as it approaches full output.
The Iraqi oil ministry official stated that Iraq is facing a severe fiscal crisis due to a significant decline in oil exports caused by conflict in the Middle East. Therefore, OPEC should give serious consideration to its request for a higher production quota.
Iraq has long argued that its current OPEC quota does not match its actual production capacity or the economic needs of its post-war reconstruction. The country's Prime Minister has previously called for a review of oil export quotas based on its actual capacity and population base.
It is noteworthy, however, that Iraq has consistently exceeded its production quota under the OPEC+ framework in recent years. Influenced by the dispersed authority over energy policy between the central government in Baghdad and the Kurdistan Regional Government, Iraq's ability to implement production cuts is limited.
OPEC+ is scheduled to hold its next meeting on July 5th. With Iraqi officials using a somewhat threatening tone to demand a higher quota, the latest decision to be announced by OPEC+ next week is expected to be closely watched.
Securing a higher production quota would not only help alleviate Iraq's pressure to meet quota targets but also assist in increasing crude oil exports to boost fiscal revenues as its production capacity recovers in the future. However, even if granted a higher quota, the impact on the global crude supply landscape in the near term is likely to be minimal, given Iraq's current slow pace of production recovery.
For OPEC, if Iraq, one of its founding members, ultimately considers leaving, it would likely represent another blow to the organization following the United Arab Emirates' exit earlier this year.
As OPEC's third-largest producer, the UAE suddenly announced on April 28th that it would withdraw from OPEC and the OPEC+ mechanism effective May 1st, ending its 59-year history as a member. The UAE's exit was not a spur-of-the-moment decision but rather the inevitable result of accumulated contradictions between its long-term capacity aspirations and OPEC's collective decision-making mechanism.
In recent years, the UAE has steadily advanced its energy capacity expansion plans, aiming to increase its oil production to 5 million barrels per day by 2027. OPEC's quota system has consistently acted as a constraint on its ability to utilize this capacity.
At successive OPEC+ meetings, the UAE repeatedly sought larger production quotas to match its capacity investments, often clashing with Saudi Arabia, which has primarily advocated for limiting production to support prices. This friction repeatedly pushed the UAE to the brink of exit, which ultimately became a reality.
Some analysts point out that the UAE hopes to free itself from OPEC's quota constraints, utilize its idle capacity, and adjust production more flexibly. For the UAE, leaving OPEC is expected to grant it full autonomy over energy production and trade, maximizing its potential for economic growth.
According to its official statement, after exiting, it will no longer be bound by the organization's production limits, allowing it to coordinate more flexibly with global partners and investors, focusing on unleashing capacity in crude oil, petrochemicals, and natural gas, aligning with its long-term economic vision.
In the long run, the UAE can independently set its production policies, avoiding missed market opportunities due to OPEC's collective decisions. This move also supports its national oil company, ADNOC, in advancing its 550 billion dirham capital expenditure plan, promoting the transition of the energy industry towards lower carbon emissions and diversification, balancing short-term gains with long-term sustainable development.
Furthermore, free from OPEC constraints, the UAE is expected to further expand energy cooperation with non-OPEC countries, reducing reliance on a single cooperative system and enhancing its bargaining power in global energy trade.
Simultaneously, the UAE's exit could significantly impact OPEC's influence and the stable operation of the global energy market. As a core global oil producer alliance founded in 1960, OPEC's central role is to stabilize international oil prices through collective production adjustments. The exit of a core member like the UAE directly weakens OPEC's capacity to regulate supply—especially with Saudi Arabia becoming the only member with substantial spare capacity, OPEC's ability to smooth out supply-demand imbalances has significantly diminished.
More importantly, some analysts believe the UAE's departure could mark "the beginning of the end for OPEC." Energy industry analysts suggest that with the UAE's exit, OPEC will not only lose about 15% of its production capacity but also one of its most compliant members. Other OPEC members may follow the UAE's example in the future, which could signify a fundamental reshaping of the Middle East's geopolitical landscape and the global oil market.
In a worst-case scenario, if Iraq ultimately follows the UAE in leaving OPEC, it could prompt other oil producers dissatisfied with their quotas to exit as well. OPEC's collective regulatory power would be further weakened, potentially ushering the global energy market into an era of "decentralized competition" with more frequent oil price volatility.
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