Iraq will draft its budget based on an average oil price of $42 per barrel for next year, oil minister Ihsan Abdul Jabbar Ismail said this weekend at an event in Baghdad, as quoted by Argus Media.
Even so, Baghdad expects oil to actually trade at an average of $50 per barrel, according to a Bloomberg report.
This compares with an average oil price of $56 per barrel for the 2019 budget, Argus noted, adding that Baghdad did not approve a budget for this year, when the drop in oil prices and OPEC+ restrictions on production have taken their toll on the country, deepening its deficit and forcing Baghdad to borrow more to cover expenses that would have, under other circumstances, been covered by revenues from oil.
As a result, Iraq is now seeking advance payments for future oil production as a means of filling its budget gaps. The country's oil marketing company, SOMO, is seeking oil buyers who would agree to start paying for future deliveries in January next year, for a period of five years.
"Prepaid oil cargoes are part of an urgent plan to boost state budget and overcome financial crisis. We have obligations towards OPEC to cut output, we have to repay foreign companies debts and also to keep our economy standing and this is why we need cash in advance for some of our oil sales," a Ministry of Oil official told Reuters last week.
Iraq is OPEC's second-largest oil producer and exporter, but both production and exports have suffered this year. The latter, however, are growing, despite production cuts. In December, Iraq will export 2.8 million bpd of crude, Ihsan Abdul Jabbar Ismail said this weekend. That's up from 2.7 million bpd in November. Production also grew in October-the last month for which there are figures-to 3.84 million bpd.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More