Iraq is debating whether to ask to be exempted from the oil production cuts OPEC+ agreed on this April. Initially set at 9.7 million bpd, the cuts have now been eased to 7.7 million bpd but as the second-largest producer in OPEC, Iraq is shouldering quite a large chunk of the total burden and is not happy about it.
“Iraq always believed they were not properly treated in December 2016 when they were not exempted. As the economy continues to reel from low prices this issue keeps resurfacing,” a source from OPEC told Reuters.
Just a week ago, Iraq’s oil minister Ihsan Abdul Jabbar denied a report in the Iraqi state news agency, INA, saying he had sought an exemption from the agreement.
“The minister revealed efforts to exempt Iraq from the agreement to cut exports in OPEC and the subject has been broached with the organisation’s oil ministers in three consecutive meetings,” the INA report said.
Soon after Reuters carried the story, the oil ministry came out with statement saying, “The Ministry of Oil would like to categorically deny this baseless statement, and affirm that, to the contrary, Iraq remains fully committed to the April OPEC+ Declaration of Cooperation, and the compensation mechanism agreed in June.”
Even if it is officially trying to keep its end of the bargain, Iraq could certainly use some relief of the sort Iran and Libya are getting from OPEC, in the form of an exemption from the cut. Yet while those two have suffered major slumps in production which makes them involuntary collaborators with the cuts, Iraq has been producing more than it should, compromising the compliance of the whole group.
However, the country needs every oil dollar. It is still dealing with the aftermath of the Islamic State insurgence as well as will longer-standing problems with public services and corruption that last year sparked protests. OPEC is unlikely to grant Iraq an exemption from the agreement—that would devastate prices. It remains to be seen if Iraq is desperate enough to refuse to comply. That would also devastate prices, unfortunately.
By Irina Slav for Oilprice.com
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