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Oil Prices Drop On OPEC+ Uncertainty

Oil Prices Drop On OPEC+ Uncertainty

Oil prices fell on Tuesday…

OPEC’s No.2 Cuts Oil Exports To Asia In Surprise Move

Iraq, OPEC’s second-biggest producer and the least compliant member in all previous rounds of cuts, has told some of its Asian oil buyers that it would not send the full contractual volumes requested for June, traders who were informed of the measure by Iraq’s state oil marketing company SOMO told Bloomberg on Wednesday.  

At least three Asian oil customers who buy oil from Iraq were told not to expect the full volumes next month, according to Bloomberg’s sources.

It is a rare occurrence for OPEC’s biggest cheater in the previous OPEC+ pacts to reduce supply to its key market, Asia, and inform clients of reduced allocations even before Saudi Aramco, which is late with its allocations for June this month.

The reduction in Iraq’s exports could be a sign that even OPEC’s least compliant member is trying to play its part this time, as oil prices are so low that they are devastating Iraq’s primary budget income, oil revenues.

While Iraq is cutting allocations for June, it was still struggling to come up with a plan about which oilfields should cut production, even after the OPEC+ agreement had already entered into force. 

As of last week, Iraq hadn’t informed its key oil customers about how much crude the country would export because of protracted talks with international oil companies, which have been further complicated by Iraq’s inability to form a new government, industry and trade sources told Reuters last week. 

As part of the OPEC+ deal, Iraq needs to cut around 1 million barrels per day (bpd) of its production, which stood at 4.585 million bpd in March 2020, as per OPEC’s secondary sources in its latest Monthly Oil Market Report (MOMR).

But Iraq has yet to agree how the cuts should be divided among the many major Iraqi oilfields, most of which are operated by international majors, including ExxonMobil, BP, Eni, and Lukoil, a spokesman for the Iraqi state-owned Basra Oil Company (BOC) told Reuters. 

By Tsvetana Paraskova for Oilprice.com

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  • Maxander on May 13 2020 said:
    Oil prices falling below zero is the biggest shock to oil producing world. The memory of this will keep on haunting producers from time to time in coming 4-5 years.
    Oil prices going on other higher positive side will only weaken this sort of shock memory.

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