Iraq seeks oil production cut exemption
BAGHDAD, October 24, 2016 – OPEC’s second-largest producer, Iraq, said on Sunday it should be exempt from oil production cuts on the grounds that its production has already been decimated by violence, sending jitters through the market.
“We are fighting a vicious war against IS,” Oil Minister Jabar Ali Al Luaibi told journalists, explaining that his country should be entitled to the same exemption as Libya and Nigeria, whose output has also been slashed by armed conflict.
Iraqi officials added that they were hoping October’s production would be slightly higher than September’s, which stood at more than 4.77 million bopd.
“We should be producing 9 million if it wasn’t for the wars,” said Falah Al Amri, the director general of state oil marketing company SOMO.
OPEC agreed last month to reduce production by some 200,000-700,000 bopd in order to drive prices up. Yet continued haggling, both inside the organisation and with major non-OPEC producers such as Russia, has led many analysts to warn of risks that the deal, which is expected to be signed next month, may not be implemented properly.
Oil prices took a hit on Monday after the news from Iraq. By the early afternoon, Brent crude futures on London’s ICE Futures exchange were down USD 0.32 since Friday’s closing of USD 51.78, while December light, sweet futures slipped some USD 0.53 to USD 51.46 on the New York Mercantile Exchange.
The increasing number of operational rigs in the US, up by 11 this month, is contributing to the downward pressure on the prices.
“We should see rig counts continue to increase in the wake of the recent price rally,” Morgan Stanley representatives told Reuters.
Nevertheless, pundits say the markets may be slowly shifting toward rebalancing the oversupply of the past two years. “The market moved into a small deficit in Q3, will remain so in Q4 and then the deficit will expand significantly in 2017,” a Sunday Barclays bank note to clients quoted by Reuters said.
Recent developments that could signal upward pressure on the oil prices included a general statement of co-operation after the meeting between Russian and Gulf energy ministers in Riyadh on Sunday, as well as comments by the Iranian Deputy Oil Minister Amir Hossein Zamaninia, who told journalists that Tehran would encourage other OPEC members to co-operate in order to bring the price back up to USD 55-60 a barrel.