Iraq is pushing for a higher oil production quota within OPEC, arguing that its current allocation is significantly below its production capacity. Former Prime Minister Mohammed Al-Sudani had previously cited Iraq's vast crude resources, growing oil production capabilities, a large population, and the need for petrodollars for post-conflict development as justifications for this increased quota. The country's output capacity is estimated at 5 million barrels per day (bpd) and is projected to increase to over 6 million bpd by late 2028 due to new oilfield development contracts.
The discussions around Iraq's quota are occurring in the context of recent geopolitical shifts and OPEC dynamics. The United Arab Emirates' exit from OPEC has created a precedent, and some analysts believe Iraq might be motivated by this. Iraqi energy specialist Waleed Khaddouri, however, suggests that if Iraq raises the issue now, it might be influenced by external factors, possibly linked to Iran or the US. Despite calls from some Iraqi economists to leave OPEC to maximize export potential, experts largely believe Iraq will not quit the organization, which was founded in Baghdad in 1960.
Quitting OPEC could have significant repercussions, including a potential collapse of oil prices. Saudi Arabia, for example, is currently producing around 7 million bpd but has a capacity exceeding 12 million bpd. If OPEC were to weaken or dissolve, Saudi Arabia might increase production significantly, leading to a glut in the market. Consequently, the benefits of a higher quota or independent production would be diminished for all producers, including Iraq and the UAE.
In related news, following a US-Iran deal that aims to fully reopen the Strait of Hormuz, Iraq has instructed operators of five major oil fields to increase production to pre-war levels, targeting an output of over 3 million bpd. This move by Basra Oil Co. indicates Iraq's readiness to boost its output. Separately, OPEC+ recently approved a fourth oil output quota hike, with Iraq's quota increasing by 26,000 bpd from July. This increase is part of a gradual unwinding of a 1.65 million bpd production cut agreed in 2023, though the overall output of the group has been significantly impacted by the conflict in the region.
Iraq’s budget has been severely affected by the closure of the Strait of Hormuz, with current oil revenues covering only 17% of public expenditures. In March, total exports reached 550,000 bpd, generating only $1 billion. This financial strain is prompting Iraqi politicians, like Qusay Mahbuba of the Amarji party, to call for the removal of production quotas for 10 years as compensation for war-related disruptions, and even to reconsider Iraq's OPEC membership, despite no official intention to leave the organization in the near future.
