Saudi Aramco is expected to slash the official selling price of its flagship Arab Light crude by between $6.50 and $8.00 per barrel for August loading, according to a Reuters survey published Friday. That's not a typo. The world's largest oil exporter is preparing to cut prices by more than 10% in a single month as crude exports from the Persian Gulf have recovered to at least 75% of pre-war levels , Bloomberg reported. Iraq, OPEC's second-largest producer, has threatened to leave the organization if it doesn't receive a higher production quota to match the country's output capacity , The National reported Wednesday. Coming just weeks after the UAE's May 1 exit, the threat puts the 66-year-old cartel on the edge of irrelevance.
Oil markets are pricing in the collapse. WTI traded at $71.50/bbl per barrel on Thursday, up +0.63%, while Brent settled at $75.20/bbl, gaining +0.51%, according to market data. The Financial Times noted that Brent crude has dropped below the $72.48 a barrel it traded at in late February before the Iran conflict erupted . The Energy Select Sector SPDR (XLE) closed at $54.09, flat on the day, with its 14-day RSI at 37.8 -- a level that typically signals oversold conditions.
Can OPEC Survive a Second Defection?
Iraq is suffering a financial crisis as a result of the Iran war, and a senior Iraqi oil ministry official told Reuters that a significant rise in its OPEC quota should be treated seriously . The country's position is more precarious than the UAE's was. Oil revenue accounted for 53% of Iraq's real GDP in 2025, according to the World Bank, but this revenue is almost entirely reliant on transport through the Strait of Hormuz . Data from QuantCube Technology showed that Iraq's exports have almost completely halted since the outbreak of war with Iran , CNBC reported.
Iraq is the world's sixth-largest crude producer and, like the UAE before it, has spent billions expanding output capacity it cannot fully deploy under existing OPEC discipline , according to analysis from Mizuho Securities cited by MarketWatch. Robert Yawger of Mizuho Securities warned that if Iraq follows and producers begin racing to put unconstrained barrels on the market, oil could fall below $50 a barrel -- a level not seen since the COVID collapse of 2020.
Iraq's oil ministry said later on Thursday that reports suggesting Baghdad could end its membership in OPEC "did not reflect the Iraqi government's official position," but added that it continues to stress the importance of reviewing oil production quotas , Reuters reported. The denial was carefully worded. Separate sources told Reuters Iraqi officials had considered leaving OPEC, but the current plan was to remain a member and seek a higher quota .
The timing is brutal for Saudi Arabia. Saudi Arabia's spare capacity of 2 million barrels or more gives it a unilateral market lever, but deploying it aggressively to punish defectors risks accelerating the very price decline it would seek to avoid , according to Mizuho's analysis. The kingdom is caught between enforcing discipline and watching the cartel disintegrate.
Where Is the Missing Oil Going?
The Strait of Hormuz reopened under a U.S.-Iran memorandum of understanding signed June 18, but the physical recovery is uneven. Confirmed oil shipments through Hormuz have risen to around 4.8 million barrels per day since the U.S.-Iran deal, according to Kpler . But exports remain well below prewar levels when 15 million bpd exited the strait , CNBC reported.
China's seaborne crude imports will average about 6.4 million barrels a day in June, according to preliminary data from Kpler -- the lowest since October 2016 and about 8% less than May , Bloomberg reported Thursday. The Asian nation has cut purchases by about 4 million barrels a day from usual levels since the Iran war broke out in late February . That's a demand shock roughly equivalent to removing all of Canada's oil production from global markets.
Beijing has absorbed the enormous supply shock by curbing oil products exports, reducing refinery runs and tapping commercial stockpiles, but a weak economy and an accelerating shift to electric vehicles has curtailed its need for oil , Bloomberg noted. China was seen stockpiling crude at a rate of between 900,000 barrels and a million barrels daily last year, accumulating about 1 billion barrels in spare oil -- enough to run the country's refineries for more than two months at current rates.
The question is whether Chinese demand rebounds when Gulf supply fully normalizes, or whether the war has permanently accelerated the country's shift away from oil. GL Consulting is among those that expect refining activity to remain subdued, forecasting a 5% drop in 2026 .
