OPEC’s second largest producer won’t give up on output cuts

OPEC’s second-largest producer and the biggest laggard in the output cuts, Iraq, will further reduce production and remains committed to the OPEC+ pact, said Iraqi Deputy Prime Minister and acting Oil Minister Ali Allawi.

“Despite Iraq's severe financial constraints, we’re addressing technical issues that will allow us to further reduce oil output,” Allawi tweeted, adding that “We remain committed to the OPEC+ deal, and to doing our part towards ensuring a stable and secure global energy market.”

Iraq, which was the least compliant member of the OPEC+ pact in the previous agreements, was slow to begin the new round of cuts, too. A week after the new agreement entered into force on May 1, Iraq was still negotiating with oil majors about which oilfields would need to cut production.

As part of the OPEC+ deal, Iraq needs to cut around 1 million barrels per day (bpd) of its production, which stood at 4.585 million bpd in March 2020, as per OPEC’s secondary sources in its latest Monthly Oil Market Report (MOMR).

Yet, Iraq was said to have told some of its Asian oil buyers in early May that it would not send the full contractual volumes requested for June. This could be a sign that even OPEC’s least compliant member is trying to play its part this time, as oil prices are so low that they are devastating Iraq’s primary budget income, oil revenues.

According to a Reuters survey, OPEC failed to fully comply with its share of the cuts in May, and Iraq, as well as another serial laggard in compliance, Nigeria, failed again to deliver the cuts they had promised. 

Considering the very high share of oil revenues in its budget, Iraq should in theory be one of the most motivated producers in OPEC to see oil prices much higher than they currently are.

Iraq’s oil revenues in May rose from April, despite the fact that it sold fewer barrels of oil last month, AFP reported on Tuesday, citing oil ministry data. Iraq earned $2.09 billion from oil sales in May, up from just $1.4 billion in April, when prices had collapsed. 

This article was originally published on Oilprice.com