OPEC Explained: UAE Exit and Iraq’s Withdrawal Threat
Why in the news
Iraq, now OPEC’s second-biggest producer after the UAE’s departure, said it might quit unless it received a much higher quota for its post-war rebuilding needs, but backed off the same day.
About OPEC
- Permanent intergovernmental body of major oil exporters that coordinates petroleum policy to steady markets and prices, ensure fair returns and reliable supply.
- Allots mandatory production quotas and manages the OPEC Reference Basket (ORB).
- HQ in Vienna since 1965 (earlier Geneva); Secretary-General Haitham Al-Ghais of Kuwait.
Timeline
| Year | Event |
|---|---|
| 1960 | Founded at Baghdad (14 September) with 5 members |
| 1965 | HQ moved from Geneva to Vienna |
| 1968 | Petroleum Policy Declaration asserting member control of natural resources |
| 1973 | First oil crisis triggered by the Arab oil embargo |
| 1976 | OPEC Fund for International Development set up |
| 2016 | OPEC+ formed under Declaration of Cooperation |
| 2020 | COVID demand collapse, historic OPEC+ cuts |
| 2026 | UAE exits on 1 May; Iraq threat on 25 June |
Member exits
| Country | When | Why |
|---|---|---|
| Indonesia | 2008 and again 2016 (two exits) | Became a net importer as output fell |
| Qatar | 2019 | Wanted to concentrate on LNG |
| Ecuador | 2020 | Wanted to pump above quota |
| Angola | 2024 | Disagreement over quotas |
| UAE | 1 May 2026 | Its 4.85 mbpd capacity did not fit its quota |
| Iraq | June 2026, threat retracted | Capacity above quota and rebuilding costs |
Current 11 members
Algeria, Congo (Republic), Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia and Venezuela; the founders still in are Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
Functions
- Production quota allocation.
- Maintaining the ORB, a weighted average of member crudes.
- Voluntary supply cuts in slumps.
- Climate policy participation at UNFCCC COPs.
- Coordinating investment cycles.
OPEC Reference Basket
A weighted average of 13-14 member-country crudes, issued daily by the OPEC Secretariat in Vienna. It includes Saharan Blend, Iran Heavy, Basra Light, Kuwait Export, Es Sider, Bonny Light, Arab Light and Merey; Brent and WTI remain dominant global benchmarks.
Exam angle
- Founding members: Iran, Iraq, Kuwait, Saudi Arabia, Venezuela.
- OPEC is based in Vienna, not New York; EU and US are not in OPEC+.
- OPEC’s market share has been declining for a decade, per the source notes.
- Banking link: oil imports, current account deficit and inflation.