The Organization of the Petroleum Exporting Countries (OPEC) is confronting significant challenges amid shifting geopolitical and market dynamics. Iran’s oil production has fallen to its lowest level in six years, while the possible reopening of the Strait of Hormuz threatens to alter global oil supply patterns and weaken OPEC’s influence over the market.
According to OPEC’s latest report, Iran’s daily oil output dropped by 546,000 barrels in May, reaching about 2.33 million barrels per day. This marks the third consecutive month of decline and reflects ongoing tensions and export restrictions affecting the country. Since the recent escalation of military conflicts in the region, Iran’s total production has decreased by roughly 900,000 barrels per day compared to pre-crisis levels. Meanwhile, some Arab member countries have seen a partial recovery in production, but overall output from OPEC states and the recently departed United Arab Emirates (UAE) remains well below previous levels.
The UAE’s withdrawal from OPEC after nearly six decades has reduced the group’s membership to 11 countries and diminished its collective production capacity. The UAE, possessing significant spare capacity and flexibility, aims to increase its output independently once shipping through the Strait of Hormuz resumes. This move undermines OPEC’s cohesion and pricing power, as the cartel traditionally relies on coordinated supply control to stabilize global oil prices.
The closure of the Strait of Hormuz due to conflict with Iran has been a major factor disrupting oil exports from the Middle East, cutting about 13 million barrels per day—approximately 13% of global supply—and causing billions in lost revenue and infrastructure damage. The reopening of this critical waterway could trigger a race among regional producers to restore volumes quickly, potentially leading to oversupply and price volatility. Saudi Arabia and other Gulf states are expected to increase exports aggressively to offset budget shortfalls caused by the conflict.
However, OPEC’s ability to manage such a recovery is weakened by internal divisions and external pressures. Saudi Arabia, traditionally OPEC’s dominant member, faces challenges from both within and outside the cartel. Its growing cooperation with Russia—a major oil producer outside OPEC—through the informal OPEC+ alliance aims to maintain market stability but is complicated by differing long-term goals and geopolitical tensions. Russia itself struggles under Western sanctions and discounted oil sales, limiting its role as a swing producer.
Despite these difficulties, global oil demand is forecasted to rise by over one million barrels per day in 2026 and even more in 2027. This growing demand may provide some support for prices but also increases competition among producers eager to regain market share once exports through the Strait of Hormuz normalize. Analysts warn that if multiple producers ramp up output simultaneously, a surplus of around five million barrels per day could emerge, heightening risks of a price war that would further erode OPEC’s market influence.
In summary, OPEC is navigating a complex environment marked by declining Iranian production, member departures, geopolitical instability around key shipping routes, and shifting alliances with non-OPEC producers like Russia. The cartel’s future ability to control supply and stabilize prices will depend on how it manages these internal fractures while responding to evolving global energy demands.
