Iraq's hint that it could exit OPEC is yet another source of potential tumult for the global oil market in 2026
Iraq is hinting that it could become the next major oil producer to exit OPEC - a now-fraying alliance of many of the world's biggest crude producers, created decades ago to control oil prices.
It's yet another source of potential tumult for the global oil market in 2026, starting with the shock move by the U.S. to take control of Venezuela's vast oil wealth and followed by the U.S. and Israel's war against Iran.
Now, the question is whether more Gulf states, needing to raise cash to repair infrastructure damaged by the Iran war, will follow the United Arab Emirates and quit OPEC+ to avoid its production restrictions. OPEC+ consists of the Organization of the Petroleum Exporting Countries plus a number of its allies.
"Discontent inside OPEC threatens to unravel OPEC and put pressure on producers' willingness to cooperate to control prices," said Robert Yawger, director of energy futures at Mizuho Securities USA.
"If everyone starts producing as much as they can and putting those barrels on the market as fast as they can, oil could deep dive," said Yawger - adding that oil prices could trade below $50 a barrel, a level they haven't fallen to since COVID.
Global benchmark Brent crude futures (BRN00) (BRNQ26) topped $115 a barrel in March but have since retreated to $72.41 on Friday morning, giving back all of its gains since the war in Iran started. The West Texas Intermediate contract (CL.1) (CLQ26) for August delivery fell 3.2% to $69.67 a barrel, according to FactSet data.
The U.A.E. left OPEC on May 1, and on Thursday, Iraq threatened to also exit the cartel if it isn't allowed to produce oil more freely.
Iraq is the world's sixth-largest crude producer, as the below chart shows. Like the U.A.E., it has invested billions of dollars to increase its production, yet would face production limits under OPEC rules, Yawger noted.
SOURCE: OPIS, MARKETWATCH
To be sure, the U.S.'s emergence as a top oil producer has clearly weakened OPEC+'s ability to dictate oil prices the way it did in the 1970s by creating a large alternative source of crude supply. Meanwhile, the recent military operations involving Venezuela and Iran have further complicated OPEC's effort to manage the market, leaving a small group of producers - mainly Saudi Arabia, Iraq and Kuwait - to shoulder much of the burden of balancing global oil supply.
Over the last four months of war, OPEC was "obsolete" because many of its members could not move barrels to supply the market, Yawger said. In turn, the U.S. took over OPEC's role as the key global swing producer.
"The closure of the Strait of Hormuz has been the defining shock - disrupting global supply flows, prompting countries to draw on strategic reserves and accelerating the response from alternative suppliers to offset the shortfall in supply," said Todd Fowler, U.S. sector leader for energy, natural resources and chemicals at KPMG.
Meanwhile, OPEC+ countries found their hands tied. The group has allowed production increases three times this year, but that's still only a drop in the bucket compared with estimates of more than 1 billion in lost Persian Gulf supply during the Iran war.
It could take years to rebuild Venezuela's crumbling oil infrastructure, and the Iran conflict exposed the immediate security vulnerabilities of Gulf oil reserves. The U.A.E.'s decision to finally quit OPEC in April, after years of mulling an exit, was linked to a desire to quickly exploit oil resources while they still have them.
The Saudis, as OPEC's biggest producer, can't be happy about the U.A.E.'s exit nor Iraq's threat to end its membership, said Yawger. OPEC would prefer to operate on a "unified front," he said, adding that he wouldn't be surprised if a lot of barrels hit the market from the U.A.E., Iraq and Saudi Arabia in the coming months.
Yet, unlike any other country, Saudi Arabia has spare capacity, and that means the ability to add 2 million barrels or more to the market "rather quickly," Yawger said. That also means it's able to "control the global market to a certain degree," as long as it can get its oil to market.
But OPEC could end up being squeezed by its dwindling membership, he noted, with the countries left in the group finding that they either have to produce more oil or forfeit market share to others, such as the U.A.E.
They may have to forfeit market share to Iraq in the future, too. While Iraq hasn't actually left OPEC yet, "it's not a good thing that they're grumbling" about being part of a group that limits the country's oil production, Yawger said.
Isabel Wang contributed.
-Myra P. Saefong
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 26, 2026 09:20 ET (13:20 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments