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Oil Prices Spike On Strong Crude Inventory Draw

Oil Prices Spike On Strong Crude Inventory Draw

Oil prices spiked on Wednesday…

Oil Minister: Iraq Has Already Cut 180,000 Bpd Under OPEC Deal

West Qurna field

Amid speculation whether Iraq would really play along with the OPEC production cuts, the oil minister of the cartel’s no.2 producer said on Monday that the country had already cut 180,000 bpd off its production, and planned to reduce output by another 30,000 bpd by the end of January.

Speaking at an industry event in London, Iraq’s oil minister Jabar Ali al-Luaibi said that Iraq had cut production from a level of 4.75 million bpd, Reuters reports, but this was not the reference basket that OPEC used to determine who should cut what under the production cut agreement signed last November.

Under the November 30 OPEC deal, Iraq had promised to cut 210,000 bpd from a reference production level of 4.561 million bpd—for a production target of 4.351 bpd. Before signing the agreement, OPEC’s second-biggest producer had pleaded exemption on the grounds that it needs revenues to fight Islamic State. Iraq had also disputed the secondary sources data that OPEC used to calculate the baseline for the production cuts.

According to OPEC’s latest Monthly Oil Market Report published last week, although secondary sources placed OPEC’s total crude oil output at 33.08 million bpd on average in December, down by 221,000 from November, crude oil output increased the most in Iraq, whose production reached 4.632 million bpd last month, up by 42,600 bpd from November. Iraq’s self-reported production figure for December is 4.830 million bpd, up by 30,000 on the month.

Related: OPEC + Russia Agree On ‘’Monitoring Mechanism’’

Today, its oil minister said that production cuts started at fields operated by national oil companies. Iraq has contacted international oil companies and has so far received a “good response” from most of them, the minister said, according to Reuters. In addition, according to the minister, Russia’s Lukoil, operator of the West Qurna-2 oil field, had recently told al-Luaibi that it was ready to reduce production by 20,000 bpd without compensation.

Unlike other OPEC members whose national oil companies control all or most of the production, Iraq has a number of international oil companies that operate fields in the south. Iraq’s contracts with the IOCs include provisions that the country should compensate producers for having to cut back production. These contractual commitments, together with the Kurdistan Regional Government (KRG) that controls fields in the north and may not play along with the cuts, makes Iraq’s task of complying with the OPEC deal even more difficult.

By Tsvetana Paraskova for Oilprice.com

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