Iraq Clarifies Stance on OPEC+ Production Cuts Ahead of June Meeting

Iraq clarifies its stance on OPEC+ production cuts, stating it is not opposed to extending current quotas. The country's oil minister had previously suggested it would not agree to new cuts, citing economic concerns and production plans.

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Bijay Laxmi
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Iraq Clarifies Stance on OPEC+ Production Cuts Ahead of June Meeting

Iraq Clarifies Stance on OPEC+ Production Cuts Ahead of June Meeting

Iraq has clarified its position on OPEC+ production cuts, stating that it is not opposed to extending the group's current quotas when members convene on June 1. The clarification comes after Iraqi oil minister Hayan Abdul Ghani suggested on May 11 that the country would not agree to any new cuts, citing concerns over straining Iraq's economy and plans for increasing production.

Why this matters: The outcome of the OPEC+ meeting will have a significant impact on the global oil market, influencing prices and supply chains. A unified stance among OPEC+ members is crucial to maintaining market stability, and any discord could lead to volatility in theenergy sector.

An Iraqi oil official explained, "The minister implies that further cuts will strain Iraq's economy and plans for increasing production and our commitment to upstream IOCs." The official's statement sheds light on the complex factors influencing Iraq's stance, as the country heavily relies on revenue from crude exports to finance its budget and has agreements with international oil companies that could be impacted by reduced production.

Iraq, OPEC's second-largest producer, has struggled to comply with its 4.00 million b/d production target in recent months. In April, the country pumped 4.24 million b/d of crude, with an estimated 200,000 b/d coming from the semi-autonomous Kurdistan region. To compensate for overproduction since January, Iraq has agreed to a series of "compensation cuts."

The country's reliance on associated gas from oil production as feedstock for its power plants further complicates the situation. Many of Iraq's fields are operated under technical service contracts by international oil companies such as ExxonMobil and BP, and additional cuts could make Baghdad liable for remuneration for barrels not produced.

Mike Muller, Asia head for trading house Vitol, commented on the situation, saying, "The smart money in trading circles will assume [Abdul Ghani] did not mean he was going to depart from the group and start opening the taps. Far from it." Muller's statement suggests that despite the initial comments, market participants expect Iraq to remain committed to the OPEC+ alliance and its production management efforts.

As the June 1 OPEC+ meeting approaches, the clarification of Iraq's stance provides insight into the challenges and considerations member countries face in balancing their economic needs with the group's collective efforts to stabilize oil markets. The meeting will be closely watched for decisions on extending or adjusting the current production cuts, which were implemented in October 2022 to support crude prices.

Key Takeaways

  • Iraq clarifies it's not opposed to extending OPEC+ production cuts.
  • OPEC+ meeting outcome will impact global oil market and prices.
  • Iraq's economy and production plans influence its stance on cuts.
  • Iraq has struggled to meet its 4.00 million b/d production target.
  • Market expects Iraq to remain committed to OPEC+ alliance.