Iraq has considered leaving OPEC if the oil producer group does not 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.

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”.Iraq’s oil ministry said on Thursday that reports suggesting Baghdad was considering ending its membership in OPEC did not reflect the ​Iraqi government’s official position.OPEC and Saudi authorities did not immediately respond to requests for comment.Oil prices briefly extended their decline after the Reuters report, ​trading below $73 a barrel.The Iraqi officials’ comments come as OPEC+, which groups OPEC members with Russia and other producers, is undergoing a review of ‌members’ ⁠oil production capacity.The assessments will be used for 2027 output baselines, from which quotas are set.
Iraq has struggled to meet its OPEC quotas in the past, as it expanded oil capacity with the help of Western oil companies.Iraq pumped 1.48 million bpd in May, according to OPEC data, down from almost 4.2 million in February before the closure of Hormuz.A government spokesperson said Iraq was working to return to full export capacity, but declined to comment ​further on its OPEC quota or ​the possibility of exiting the ⁠group.”Iraq is working to restore its full oil export capacity and aims to raise oil production to 7 million barrels per day over the coming years,” Iraqi spokesperson Haider al Aboudi said.There was no official comment from Russia ​on the Iraqi officials’ comments, but a Russian oil source said they do not represent a major ​challenge for the OPEC+ ⁠deal and a slight increase in Iraq’s quota may help.Since taking office in May, Iraqi Prime Minister Ali al-Zaidi has signaled that rebuilding Iraq’s economy, attracting foreign investment, and combating corruption will be central to his administration’s agenda.

On Wednesday, he said Iraq wanted OPEC to raise Iraq’s oil output quota in line ⁠with its ​production capacity and population, state news agency INA reported.

Seven core members of OPEC+ have increased ​their output quotas from April to June by almost 600,000 bpd, although most have not been able to deliver on those higher targets due to the disruption to Hormuz exports.