Iraq Warns It May Quit OPEC as Quota Dispute Escalates After UAE Exit

Iraq's oil ministry warned Thursday that the country may leave the Organization of the Petroleum Exporting Countries if OPEC does not raise its production quota to match Iraq's export capacity. The threat follows the United Arab Emirates' departure from OPEC on May 1, 2026, setting a precedent that Baghdad now invokes directly. Oil prices fell briefly below $73 per barrel following the initial report before recovering to a day range of $68.90 to $72.50 for WTI August futures.

Oil Ministry spokesman Salim Al Rikabi stated: "If that does not happen, there will be a decision regarding staying in or exiting the organisation." The ministry later clarified that a formal exit has not been proposed and does not reflect an official government position. A senior ministry official separately warned that "Saudi Arabia and other OPEC allies should treat this matter with the utmost seriousness."

The Quota Gap and Iraq's Revenue Shortfall

Iraq's July 2026 OPEC quota stands at 4.378 million barrels per day. Before the Iran war disrupted Strait of Hormuz shipping, Iraq exported nearly 4.2 million bpd in February 2026. By May 2026, actual output had fallen to 1.48 million bpd, a drop of 2.72 million bpd from its pre-crisis pace. At WTI's intraday price of $71.93 per barrel on June 25 at 14:06 ET, that production gap translates to $196 million in daily lost export revenue for a government that relies on oil for 90% of its budget.

Baghdad's ambitions extend beyond restoring pre-war volumes. Prime Minister Ali al-Zaidi has stated that Iraq wants OPEC to raise output allowances in line with the country's production capacity and population. Baghdad has publicly targeted a production level of 7 million bpd over the coming years, a figure that would make Iraq OPEC's single largest producer.

A Founding Member Invokes a Precedent

Iraq is one of OPEC's five founding members; the organization was established in Baghdad in September 1960. That founding-member status gives the exit threat political weight beyond any single barrel. The UAE, whose capacity reached 4.85 million bpd by 2024, departed effective May 1, 2026, citing a mismatch between its rising output capability and permitted quotas. Wood Mackenzie analysts noted following the UAE exit that the departure "reshapes oil markets as capacity growth, quota tensions and Saudi rivalry increase supply and price risks."

OPEC held its first ministerial meeting without the UAE on May 3, and the group raised combined quotas by 188,000 bpd. That increment did not address Iraq's fiscal shortfall. OPEC's capacity reassessment process, involving independent consultants, is ongoing and could provide a pathway to higher Iraqi quotas without a formal departure. Rystad Energy senior vice president Claudio Galimberti cited the group's track record through crises including the COVID-19 pandemic as evidence the organization has historically found ways to retain members facing quota disputes.

Bank Forecasts Price a Post-War Supply Recovery

Goldman Sachs cut its Q4 2026 Brent forecast to $80 per barrel from $90, citing expectations that Persian Gulf crude exports will return to pre-war levels by the end of July 2026. The bank also lowered its 2027 average Brent outlook to $75 per barrel from $80 and cut its Q4 2026 WTI forecast to $75 per barrel. Morgan Stanley projects Brent at $80 per barrel for Q4 2026, aligned with Goldman on the endpoint, but holds a higher Q3 2026 estimate of $90 per barrel, reflecting a slower view on Gulf tanker flow recovery.

The divergence between the two banks centers on speed. Goldman assumes full normalization of Persian Gulf exports by July; Morgan Stanley expects months will be needed to restore shipping routines and restart idle wellheads at scale. If the slower-recovery scenario prevails, Iraq's fiscal position improves only partially through the third quarter, sustaining pressure on Baghdad to secure a higher OPEC quota rather than rely solely on the Hormuz reopening.

Market Snapshot

Brent crude traded at $74.02 per barrel as of 8:45 a.m. ET on June 25, 2026, per Fortune, down from $99.46 per barrel one month earlier. WTI August front-month futures traded at $71.93 per barrel at 14:06 ET, per OilPrice.com, within a day range of $68.90 to $72.50. Brent has declined 25.57% in one month as the US-Iran ceasefire framework and Strait of Hormuz reopening talks erased the wartime supply risk premium.