Iraq Contemplates OPEC Exit Over Oil Production Quotas

Iraq has considered leaving OPEC if the oil producer group refuses to allow Baghdad to significantly increase its oil production quota, sources with knowledge of the matter said Thursday.

The potential departure of Iraq, reported by Reuters, would mark a severe blow to the Organization of the Petroleum Exporting Countries, coming less than two months after the United Arab Emirates exited the group.

Iraq is OPEC's second-largest producer behind Saudi Arabia and one of its five founding members.

Baghdad relies heavily on oil revenue, which has been severely curtailed since the war with Iran effectively blocked exports through the Strait of Hormuz.

Quota Demands Amid Fiscal Strain

The Iraqi government is currently navigating a severe financial crisis brought on by the war.

A senior Iraqi oil ministry official stated that a significant upward adjustment to the country's OPEC quota is critical to addressing the fiscal shortfall.

While the current strategy is to remain within the alliance and lobby for a higher quota, the official confirmed that an exit from the group has been evaluated.

Iraq's current production quota for July stands at 4.378 million barrels per day, though active output remains significantly below this level due to the disruptions in the Strait of Hormuz.

The official warned that Saudi Arabia and other OPEC allies must treat the matter with the utmost seriousness, noting that Iraq will be compelled to consider all options if its demands are unmet.

Official Clarifications and Market Reaction

Following the initial reports, the Iraqi oil ministry issued a statement clarifying that suggestions of Baghdad considering an end to its membership do not reflect the official government position.

Global oil prices briefly extended losses following the development, with benchmarks trading below $73 a barrel.

The internal friction comes as the wider OPEC+ alliance conducts a comprehensive review of member nations' oil production capacities.

These independent assessments are slated to establish the 2027 output baselines from which future quotas will be determined.

Political Pressure for Economic Rebuilding

Iraqi Prime Minister Ali al-Zaidi, who assumed office in May, has prioritized economic rebuilding, foreign investment attraction, and anti-corruption initiatives.

Al-Zaidi publicly stated that Baghdad requires an output quota that aligns with its true production capacity and population size.

The dispute intensifies pressure on the group after seven core OPEC+ members recently increased their output quotas by nearly 600,000 barrels per day between April and June.

Most of those nations, however, have failed to meet the higher targets due to the ongoing export disruptions in Hormuz.