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COVID Fears Drive Oil Prices Downwards

COVID Fears Drive Oil Prices Downwards

Despite significant oil inventory declines…

Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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Iraq Slashes Oil Exports To Comply With OPEC Cuts

Iraq is cutting its oil exports as it seeks to achieve full compliance with its oil production quota under the OPEC+ agreement, Bloomberg has reported, citing unnamed sources from SOMO, Iraq’s state oil marketing company.

According to the sources, SOMO had informed at least six oil buyers, all in Asia, that it will not be supplying previously agreed volumes for August. Some were told they would not get any oil but will receive what they had agreed to buy in September. Others were told they would receive partial quantities of the contractual amount in August.

Iraq was among the producers hardest hit by the oil price crash in March, as it depends heavily on its oil revenues for its spending. At the time, Iraq’s oil minister called on OPEC’s head to convene an extraordinary OPEC meeting to discuss all possible ways to reverse the oil price slide.

The best way, it turned out, was to implement much deeper production cuts. As the second-largest producer in OPEC, Iraq also had to cut substantially, but it turned out to be challenging for the country to comply with its new production quota.

The cuts were supposed to begin in May, at an OPEC+ rate of 9.7 million bpd. Iraq’s portion was some 3.6 million bpd, but it only cut around 3 million bpd in May.

The country, along with Nigeria and Angola, once again became the laggard that dragged total OPEC+ compliance down, prompting Saudi Arabia to threaten them with another price war if they did not fall in line.

In June, media reports revealed that the Iraqi government had asked the foreign companies operating its largest fields—including Exxon, BP and Lukoil—to reduce production by a few more hundred thousand barrels daily. It will have to not just meet its quota for July, August and September, but cut additionally, to make up for its shortfall in May and June.

By Charles Kennedy for Oilrprice.com

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