Iraq needs crude oil to trade at $80 a barrel to be able to plug its budget holes, according to oil minister Ihsan Abdul Jabbar Ismail.
In an interview with Shafaq news agency, the top official said, "Iraq will export in 2021 about one billion and 100 million barrels of crude oil according to market data. The budget needs 140 trillion dinars ($96 billion). The price of $ 80 a barrel is the right price to make Iraq can pay the budget dues."
However, there is no chance of oil rising that high this year, Abdul Jabbar Ismail also said. Last December, the minister said Baghdad had budgeted for an average oil price of $42 a barrel for 2021, compared with $56 for 2019.
The official told Shafaq news agency that he expected Brent to hit $60 a barrel this quarter, however, rising to $62-63 by the third quarter if Covid-19 vaccines become widely available. Brent is currently trading close to $60 on signs of tightening supply.
Iraq is OPEC's second-largest producer and one of the countries most dependent on oil revenues to prop up its war-battered economy: as much as 90 percent of government spending comes from oil revenues. Because of this dependency, Iraq has been finding it hard to stay within its OPEC+ production quota, which led to clashes with the de facto leader of OPEC, Saudi Arabia.
Following pressure from the bigger producer, Iraq pledged to deepen its production cuts and, according to the latest data, has been having some success. In a bid to secure more oil revenues, the country also tried a new kind of contract, essentially borrowing money, to be repaid in crude oil. A Chinese company, Zhenhua Oil Co, signed up for the deal that will bring in some $2 billion annually for Baghdad, according to Bloomberg.
By Irina Slav for Oilprice.com
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And while I am projecting that Brent crude price will hit $70-$80 in the third quarter of 2021, it will average $60-$65 this year.
For Brent to average $80 it will need the return of the global economy to growth at 4%-5% probably by 2022.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London