OPEC out of control, oil prices plummet?

```

As member states withdraw or threaten to exit one after another, OPEC is facing its greatest risk of disintegration in decades, and the prospect of oil prices falling below $50 per barrel is no longer alarmist.

WallstreetCN previously reported that the UAE officially left OPEC on May 1, Iraq then threatened to follow suit unless granted greater production freedom. Meanwhile, a series of geopolitical shocks—such as the US seizing Venezuelan oil assets and US-Israeli military action against Iran—have severely weakened OPEC's market regulation capabilities. International benchmark Brent crude futures briefly surged above $115 per barrel in March this year, but have since fallen back to around $75, close to pre-war levels.

On June 25, media reports highlighted the core logic underlying market concerns: Once major oil producers discard quota restraints and compete to boost output, the global crude market will face a flood of supply. Robert Yawger, US energy futures director at Mizuho Securities, warned that if countries rush to push barrelled crude to the market as quickly as possible, oil prices could "plummet" below $50 per barrel—a level not seen since the onset of the COVID pandemic.

Iraq’s Threat to Exit Deepens OPEC Splits

Iraq is the world’s sixth-largest oil producer. In recent years it has invested billions to expand capacity, yet is unable to fully unleash production due to OPEC quota rules. According to Robert Yawger, this mirrors the UAE’s prior situation—the contradiction between large-scale capacity investments and strict production ceilings is the fundamental driver of centrifugal forces among member states.

Reports say Iraq has not officially withdrawn yet, but Yawger commented, "Complaints within an organization that limits a country’s oil production are not a good sign in themselves." He expects large inflows of barrelled crude from the UAE, Iraq, and even Saudi Arabia in the months ahead.

During the past four months of war, OPEC has actually been in a 'nonfunctional' state—many member states were unable to normally supply crude oil to the market due to geopolitical conflicts. Yawger pointed out that the US has effectively replaced OPEC during this period, acting as the world’s key swing producer.

Blockade of the Strait of Hormuz is the central variable in this round of shocks. Todd Fowler, head of US energy, natural resources & chemicals at KPMG, stated, "The blockade of the Strait of Hormuz is a decisive shock—it disrupts global supply flows, pushes countries to utilize strategic reserves, and accelerates the pace at which alternative suppliers fill the gap."

OPEC+ has approved production increases three times this year, but compared with estimated supply losses of over 1 billion barrels in the Persian Gulf during the Iran war, these increments are just a drop in the bucket.

Meanwhile, reports say the US takeover of Venezuelan oil assets and US-Israeli military action against Iran have further disrupted OPEC’s efforts to manage the market, forcing Saudi Arabia, Iraq, and Kuwait and other few producers to bear the main responsibility for balancing global supply.

Venezuela’s infrastructure is aged and rebuilding may take years; the Iranian conflict has exposed the immediate security vulnerabilities of oil fields in the Gulf. After years of brewing, the UAE finally decided to leave OPEC, motivated by a strategic consideration to monetize resources while they still hold value.

Saudi Arabia’s Dilemma: Stabilize the Market or Preserve Its Share

As reports indicate, Saudi Arabia, OPEC’s largest producer, is clearly unsettled by the UAE’s departure and Iraq’s threat. Yawger pointed out that OPEC has always preferred to operate as a "unified front," but centrifugal moves among member states directly undermine this foundation.

Saudi Arabia’s unique advantage lies in its ample spare capacity, theoretically allowing it to "quite quickly" inject an extra 2 million barrels or more into the market, thus maintaining some control over the global market—provided its export routes remain unobstructed.

However, as member states continue to leave, countries remaining in OPEC face a dilemma: either follow suit and increase production to maintain market share, or stand by and see their share eroded by departing UAE, Iraq, and others.

Yawger stated that internal discontent within OPEC "threatens the cohesion of the entire organization and pressures oil producers’ willingness to coordinate on prices."

Risk Warning and DisclaimerThe market carries risk; investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. All investments based on this article are made at your own risk. ```