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Oil Fundamentals Overturn Geopolitical Risk

Oil Fundamentals Overturn Geopolitical Risk

Geopolitical risk from Iraq and…

Iraq Oil Minister Says Compliance Is 85%

Oil Pipe

Iraq’s Oil Minister Jabar al-Luaibi said the country’s compliance rate with the OPEC crude oil production cut agreement has reached 85 percent. Al-Luaibi was speaking at the sidelines of the CERAWeek energy conference, and added that although oil production in Iraq was increasing, exports were at the rates agreed by the cartel’s members in November, without providing any further details.

Separately, Al-Luaibi told media that Iraq will be able to pump 5 million barrels daily in the second half of the year, suggesting that it won’t support a production cut extension, which has been the object of recent speculation. Yesterday, however, Al-Luaibi was quoted as saying that OPEC will likely “need to” extend the deal.

Signals coming from Iraq are certainly mixed. The country agreed to cut 210,000 bpd from its crude oil output in November, taking as baseline an average daily of 4.56 million bpd. In January, however, the daily average was 4.47 million bpd – nowhere near the 4.35-million-bpd target set in the agreement.

What’s more, exports are also on the rise, although truth be told, the central government in Baghdad is not the only one responsible for this. In February, total Iraqi oil exports reached 3.85 million bpd, up 1 percent on a monthly basis, but most of the rise came from the Kurdistan autonomous region. Data from Bloomberg shows that exports of crude from the fields around the northern city of Kirkuk, partially controlled by the Kurdistan Regional Government, rose by 9 percent in February, while shipments from Iraq’s largest terminal in Basra inched up by 1 percent.

Related: Iraq To Start Drilling In Highly Contested Persian Gulf

Iraq has been the main cause of worry with regard to the production cut agreement, not least because of this dual control of its oil wealth. Despite assurances from Al-Luaibi that Iraq is complying, the worry is likely to remain as Baghdad has no actual control over what Erbil does with its share of the oil.

By Irina Slav for Oilprice.com

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