ATFX: According to media reports, a senior official from Iraq's oil sector stated that due to the conflict between the United States and Iran, Iraq is facing a crisis. If Iraq's OPEC quota is not significantly increased, it will have to consider all available options. Sources indicate that Iraq is even considering leaving OPEC to break through production limits, though the primary focus remains on seeking a higher quota.
The chart shows OPEC's crude oil monthly report for May. Iraq's oil production in April 2026 was 1.389 million barrels per day. Production in March and February was 1.679 million barrels per day and 4.188 million barrels per day, respectively. The conflict between the US and Iran erupted on February 28, with its impact concentrated in March. The February production of 4.188 million barrels can be considered Iraq's normal production level. Compared to April's 1.389 million barrels, production was compressed by approximately 66.83% due to the conflict.
Based on public information, Iraq's oil production infrastructure did not suffer large-scale, substantive damage during the US-Iran conflict. The reduction in Iraq's oil output was more due to the blockade of the Strait of Hormuz, which forced a systematic halt in production, leading to a significant decline in output.
To date, OPEC has allocated Iraq a production quota of 4.02 million barrels per day, which is far above its current actual capacity but below its pre-conflict capacity. The Iraqi official's call for a higher production quota essentially reflects a common desire among all OPEC member states. Market focus is more concentrated on rumors of Iraq potentially leaving OPEC rather than on the actual request for a higher quota.
On May 1, the United Arab Emirates officially announced its withdrawal from OPEC, citing OPEC's production limits as the reason, stating that leaving would allow for autonomous production increases. If Iraq ultimately chooses to exit OPEC, and as one of its founding members, it could trigger market panic about a split within the organization. When OPEC member countries all seek to increase their production quotas, and with commercial oil tankers moving smoothly through the Strait of Hormuz, the crude oil supply could expand sharply, potentially forming a new round of pressure on the currently declining oil price trend.
The chart shows the superimposed trend of WTI crude oil and the US annual CPI rate. Their correlation is significant, with the US CPI rate generally lagging behind the highs and lows of international oil prices by about one month. After the US and Iran signed a memorandum of understanding on June 17, international oil prices came under downward pressure, with market prices falling below $70. It is expected that the US annual CPI data for June and July will remain high, but starting in August, it is very likely to decline following the drop in international oil prices.
If the UAE, Iraq, and other OPEC member states make extreme choices to increase their production quotas, it could lead to a sharp, short-term increase in crude oil supply. Continued declines in international oil prices would subsequently lead to a decrease in the US inflation rate.
Comments