Uche Cecil Izuora
Iraq has reportedly considered leaving the Organization of Petroleum Exporting Countries (OPEC) if the oil producer group refuses to allow Baghdad to significantly increase oil production, sources with knowledge of the matter told Reuters.
The prospect of Iraq leaving would be a serious blow to the Organization of the Petroleum Exporting Countries, which saw the United Arab Emirates walk away less than two months ago.
But shortly after the news was reported, Iraq’s oil ministry on Thursday denied that Baghdad had considered leaving Opec, saying claims of a possible withdrawal “do not reflect the official position” of the government.
Neither prime minister Ali al-Zaidi nor the government had proposed leaving, the ministry said.
The clarification follows reports claiming Iraq had weighed exiting the group and is keeping all available options open if its crude production quota is not raised significantly.
In response, the ministry said Iraq continues to advocate a reassessment of production ceilings within the framework agreed by OPEC and its allies in the wider Opec+ alliance, to better reflect members’ sustainable production capacity. It said the assessment should take account of Iraq’s security and economic circumstances.
The ministry was referring to the agreed independent maximum sustainable capacity assessment process within OPEC+, which is designed to recalibrate production baselines from 2027 onwards. The assessment process is underway, Iraq is taking part and it is being conducted by an independent US consulting firm according to the agreed timetable, the ministry said.
While the review will shape baselines and quotas from next year, Iraq’s production target has been steadily rising this year as Opec+ restores previously curtailed output. The alliance “expects all voluntary cuts to be fully unwound over the coming months”, the ministry said.
Seven core OPEC+ members agreed on 8 June to another 188,000 b/d increase in their collective production target for July, despite conflict in the Middle East continuing to disrupt supplies from several of the group’s biggest producers. The increase is part of a wider process to unwind 1.65mn b/d of previous production cuts.
As part of that process, Iraq’s production target has risen to 4.35mn b/d for June and 4.38mn b/d for July. But the higher targets do not yet mean higher Iraqi output.
The country remained well below its OPEC+ target in May after the US-Israel war on Iran disrupted exports through the strait of Hormuz and forced Mideast Gulf producers to rein in output. Iraq produced just 1.55mn b/d in May, compared with a target of 4.33mn b/d, according to Argusestimates.
Baghdad reiterated that future discussions over production ceilings and sustainable capacity would continue through the alliance’s established technical and consensus-based mechanisms.
The ministry’s statement reinforces a position successive Iraqi governments have advanced for several years.
Former prime minister Mohammed Shia al-Sudani repeatedly argued that Iraq’s production quota should better reflect the country’s reserves, production capacity, population and reconstruction needs. Before taking office in October 2022, al-Sudani criticised OPEC+ production agreements as unfavourable to Iraq and pledged to seek a review of the country’s allocation if appointed prime minister.
He continued pressing that case while in office, most recently calling in October last year for a formal review of Iraq’s production quota after arguing the country’s existing allocation no longer reflected its resource base or development requirements.
Iraqi officials contend the country’s reserves, production potential and reconstruction needs justify a greater role within the alliance over the longer term. The UAE’s exit from Opec earlier this year is seen in Baghdad as an opportunity to advance that goal, Argus understands.
Iraq is the group’s second-largest producer after Saudi Arabia and one of its five founding members. OPEC was formed in the Iraqi capital in 1960.
The country relies on oil for the bulk of its income, which has been slashed since the Iran war effectively blocked exports via the Strait of Hormuz.
The government is grappling with a financial crisis as a result of the war and a significant rise in its OPEC quota should be treated seriously, a senior Iraqi oil ministry official told Reuters on Thursday.
Iraq had considered leaving OPEC, but the current plan was to remain a member and seek a higher quota, he added.
Iraq’s quota for July is 4.378 million barrels per day though current output is significantly below this because of the Hormuz disruption.
“Saudi Arabia and other OPEC allies should treat this matter with the utmost seriousness. Failing that, Iraq will be compelled to consider all available options,” he said.
Asked if they had discussed an OPEC exit, he said: “It’s still premature for this step”