Iraq weighs leaving OPEC over dispute on oil production quota

Iraq’s threat to reconsider its OPEC membership turned a quota dispute into a test of the cartel’s discipline, with Baghdad pressing for a significantly higher production ceiling and warning that it would have to consider “all available options” if the group would not budge.

The fight centers on a July quota of 4.378 million barrels a day for Iraq, a level its officials see as too low for a country that was OPEC’s second-largest crude producer after Saudi Arabia in 2024 and holds 145 billion barrels of proved reserves, according to the U.S. Energy Information Administration. Iraqi oil revenue, which underpins the state budget, has also been squeezed by the war in the Middle East and the disruption of shipping through the Strait of Hormuz, where the International Energy Agency said crude and oil product flows plunged from around 20 million barrels a day before the conflict to a trickle.

A senior Iraqi oil ministry official said any meaningful increase in Iraq’s quota should be taken seriously, and that if Saudi Arabia and its allies did not respond, Baghdad would be forced to weigh “all available options.” Iraqi officials have also framed the threat as leverage rather than a clean exit, saying the country still wants a bigger quota while remaining inside the producer group.

That distinction matters because OPEC’s current structure gives larger producers more room to steer policy, while countries with constrained quotas, like Iraq, argue the system no longer reflects their capacity or fiscal needs. On June 7, OPEC+ agreed to raise July output by a combined 188,000 barrels a day among seven participating members, including Iraq, but the move did not settle Baghdad’s deeper complaint that its formal quota remained below what it could sustain.

The pressure lands at an awkward moment for OPEC. The group was created at the Baghdad Conference from Sept. 10-14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, giving any talk of an Iraqi exit unusual historical weight. Membership has already been shifting: Angola withdrew effective Jan. 1, 2024, and the United Arab Emirates left in 2026, underscoring the strain on a coalition built to coordinate supply.

For markets, an Iraqi rupture would matter far beyond the cartel’s internal politics. Iraq is one of the few large producers with the scale to affect OPEC’s balance when quotas are contested, and a break would weaken the group’s claim that it can still manage supply tightly enough to support prices. That, in turn, would feed into gasoline costs and inflation expectations worldwide, especially while the Hormuz disruption has already raised concerns about how much spare oil can reliably reach global buyers.