The shorts might be in…
After a two year rally…
Iraq vowed on Thursday to adhere to the production cuts agreed to by OPEC and its allies that went into effect at the start of the year.
OPEC’s number-two oil producer will hold its production at 4.513 million barrels per day for the next six months, according to the Iraqi Oil Ministry, as cited by S&P Global Platts. If achieved, Iraq would produce 140,000 fewer barrels per day for the next six months than it did in October 2018—the date from which the cuts were calculated.
The news comes after Kpler and Refinitive Eikon data on Thursday showed that Iraq increased its oil exports to the United States in December by 140,000 barrels per day.
Iraq’s commitment to the latest deal is critical to the cartel’s success, and not just because it is OPEC’s second largest producer. In the first round of production cuts, Iraq was the largest overproducer and least compliant member of the group. Iraq’s oil production increased through much of 2018, but has experienced slowing domestic demand in Iraq during H1 2018, according to OPEC.
Iraq produced an average of 4.392 million bpd in 2016 prior to the production cuts, and despite being part of the production cuts, Iraq managed to produce an average of 4.446 million bpd in 2017, according to OPEC’s MMOR. It’s production quota during the previous round of cuts was 4.351 million bpd. In 2018, Iraq’s production came in at 4.441 million bpd in Q1, 4.480 in Q2, ad 4.631 in Q3—the highest volume in years and the benchmark used to calculate the new production volume.
Iraq’s compliance came in somewhere around 60 percent, according to S&P Global Platts. Even if Iraq is unable to reign in production this time around too, its vocal support from the deal can’t hurt today’s volatile oil market as traders eagerly await any fresh news regarding global oil production outlooks.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.