OPEC (Organization of the Petroleum Exporting Countries) is facing serious challenges following the U.S. and Israel's war against Iran and the crisis in the Strait of Hormuz. While this organization has historically managed production and supply to control oil prices, this image has now been severely damaged.
Changes in Members' Production Strategy
Signs of this change in production strategy are clearly heard from Baghdad. Iraq, the second-largest producer in OPEC, has called for a significant increase in its production quota and has even considered the option of exiting OPEC. Baghdad aims to raise its production capacity to 6 million barrels per day and increase it to 7 million barrels per day in the coming years.
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This situation becomes more concerning for OPEC as the United Arab Emirates has exited OPEC and OPEC+ as of May 1, 2026. This exit, after nearly six decades of Abu Dhabi's membership in OPEC, has removed one of the largest producers in the Gulf from the quota system. Prior to this, Angola had also separated from the organization due to disputes over production quotas.
Economic Pressures and New Threats
While OPEC+ countries had previously agreed to a gradual increase in production, the production of 11 OPEC members in August 2023 fell to about 19.71 million barrels per day, which is 640,000 barrels less than the previous month. The reduction in Saudi exports and restrictions placed on Iranian oil are the main factors behind this decline. Thus, OPEC has been unable to transfer the production increase it had agreed upon to the market.
Iraq and the United Arab Emirates have invested billions of dollars in recent years to increase their production capacity, and it is natural that they do not want a large part of this capacity to remain unused to maintain global prices. This issue has become one of the key challenges for OPEC.
The UAE's exit has sent a clear message to other members: a major producer can conclude that the freedom to produce and sell oil is more valuable than the benefits of membership in OPEC. Now Iraq is also facing a similar issue, and economic pressure on Baghdad is intensifying. A significant portion of the Iraqi government's revenue comes from oil, and regional war and disruptions in exports from the Strait of Hormuz have put financial resources under pressure.
Iraqi officials have asked OPEC to seriously consider increasing Baghdad's quota, and informed sources say that if this request is not met, all options, including exit, may be on the table. The exit of Iraq, a country that hosted the birth of OPEC, would symbolize a significant failure for this organization.
Ultimately, the crisis of OPEC's credibility, along with the differing interests of its members and the threat of exit, has created serious challenges for this cartel. Saudi Arabia needs OPEC as a tool for price management, but countries like Iraq and the UAE, which have invested to increase capacity, prefer to sell more oil during high price periods. These threats could lead to a reduction in OPEC's power to determine prices and supply.
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