OPEC’s second-largest producer, Iraq, which also happens to be the least compliant member of OPEC+ since the group started managing supply to the market in 2017, may have finally started taking its obligations seriously.
Iraq’s State Oil Marketing Organization (SOMO) has asked some of the Asian buyers of its Basrah crude grades if they could give up delivery of some already contracted cargoes for loading this month and next, sources familiar with the matter told Bloomberg News on Tuesday.
The request for buyers to forgo some cargoes for those months suggests that this time, Iraq may be earnest in its attempt to play ball in the OPEC+ production cuts, after being the biggest cheater in all previous pacts.
Iraq’s (as well as Nigeria’s) non-compliance with the record OPEC+ cuts in May nearly wrecked last week’s meeting of the pact, ahead of which the two leaders of the group, Saudi Arabia and Russia, had insisted that there would be an extension by one month to the current level of cuts only if laggards in compliance ensured over-compliance going forward to compensate for flouting their quotas so far.
OPEC+ agreed on Saturday to extend the record production cuts of 9.7 million bpd by one month through the end of July, contingent on all countries in the pact complying 100 percent with their quotas and compensating for lack of compliance by overachieving in the cuts in July, August, and September.
Before the meeting, Iraqi Deputy Prime Minister and then-acting Oil Minister, Ali Allawi, vowed that his country would further reduce production as it remains committed to the OPEC+ pact.
At the video news conference following the OPEC+ meeting, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, emphatically said on Monday that “We have no room whatsoever for lack of conformity.”
Today, Iraq’s new Oil Minister, Ihsan Abdul Jabbar Ismaael, confirmed in a phone call with his Saudi counterpart Iraq’s “full commitment” to the cuts, OPEC said in a press release on Tuesday. Iraq confirms “its commitment to the voluntary oil production adjustments of June and July 2020, as well as the voluntary adjustments for the period following the end of July, despite the economic and financial challenges,” Ismaael told the Saudi energy minister.
By Tsvetana Paraskova for Oilprice.com
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