Global Economy — 2026-07-07

OPEC Faces Existential Crisis as Post-Iran War Oil Surplus Threatens to Drive Prices Below 40 Dollars a Barrel

BLUFSaudi Arabia's record price cut and Iraq's quota ultimatum signal OPEC+ is transitioning from coordinated rebalancing to intra-cartel competition, pointing toward a grinding slide into the $60s rather than a dramatic collapse.

OPEC+'s seven core producers, led by Saudi Arabia and Russia, agreed on Sunday to raise combined output by 188,000 barrels per day in August, the fifth consecutive monthly increase since March 123. Brent crude closed at $71.99 a barrel and WTI at $68.55, both near pre-war levels, as Strait of Hormuz tanker traffic continued recovering under an interim US-Iran memorandum 13. Saudi Arabia separately cut its official August selling price for Arab Light crude to Asia by the largest monthly margin since Reuters began tracking the data in 2003, while Iraq's oil minister told Bloomberg the country will decide whether to remain in OPEC if it cannot secure a production target near 5 million barrels a day, up from a wartime low of about 1 million 34. OPEC+ output fell to 33.13 million barrels per day in May from 42.77 million in February and has not fully recovered, according to OPEC data cited by CNBC 2. The UAE, which left OPEC in April, raised output to near-record levels above 3.8 million barrels per day in June, sources familiar with the data told Reuters 3.

Analysis
OPEC+'s cohesion, not its output arithmetic, is the variable that matters. Iraq's ultimatum on a 5 million bpd quota and Saudi Arabia's record Arab Light price cut signal a shift from managed rebalancing toward competitive positioning among members, pressuring prices even without a formal break. Riyadh's repricing could just as easily reflect routine competition for Asian demand rather than an opening move in a price war against Iraq and the UAE. A drop below 40 dollars this quarter would require a demand shock current indicators do not show, but a gradual slide toward the 60 dollar range is plausible as Gulf output normalizes faster than demand absorbs it, a dynamic obscured by internal OPEC+ quota deliberations that remain unobservable. Sourcing is broad and independently corroborated across Bloomberg and CNBC reporting.

6 sources