According to oil traders, Iraq’s oil exports will increase significantly next month as it strives to comply with the OPEC+ production reduction agreement.
According to five insiders in the Asia-Europe crude oil market, Iraqi crude oil shipments exceeded normal levels in the spot market for October shipments. The crude oil can be bought and sold on an “open-destination” basis, meaning it can be exported and shipped anywhere in the world.
Many traders said that the new Increased crude oil shipments may mean an increase in total production and exports, further unbalancing an already saturated oil market. Oil market research organization General Index Ltd. Iraq has sent mixed messages about complying with the OPEC+ deal, which allows for increased oil exports.
OPEC has allowed Iraq to increase production next month while extending compensatory production cuts. But what confuses the market is whether Iraq’s increased exports mean it may violate its new quota of 3.6 million barrels per day at a time when OPEC is redoubling its efforts to tighten discipline.
So far, Iraq’s spot crude oil prices have remained stable, suggesting that any news of an increase in production will be digested by the market. Iraq’s Basra Light crude for October delivery recently traded at a premium of 60 cents a barrel to its official selling price, compared with a premium of 30 cents a barrel in September. Two traders said prices for crude oil for shipment this week may have slipped, with premiums falling to 30 cents or even zero, according to General Index data.
An official familiar with Iraq’s export plans said the additional oil production would not violate quotas, and neither the Iraqi Oil Ministry nor state-owned crude oil marketer SOMO immediately gave an update on next month’s output. and sales plan to comment. One oil trader estimated that Iraq could supply 5 million to 10 million barrels more crude than usual in October, or 160,000 to 320,000 barrels per day.
Iraq produced just under 3.6 million barrels per day in August, and exports are expected to rise this month, according to oil tracking data through mid-September.
Iraq’s output is crucial to the entire crude oil market because it is OPEC’s largest oil producer after Saudi Arabia. Only unity among OPEC members can succeed in supporting oil prices.
Since the outbreak of the epidemic, OPEC+ has been working to get its members to reach an agreement to reduce production in response to the decline in global crude oil demand. Saudi Oil Minister Prince Abdulaziz bin Salman has been accusing members, including Iraq, of failing to abide by the production-cut agreement as members work to comply with the deal. Iraq has also repeatedly promised to implement the production reduction agreement, and its oil ministry once again emphasized in a statement to reporters on Thursday that it will work hard to complete the production reduction agreement.
OPEC+ agreed to reduce the supply of nearly 10 million barrels of crude oil per day from the market starting in May, about 10% of normal supply. That has allowed Brent crude prices to rebound above $40 a barrel, although the benchmark price is still down 37% this year.
Since the end of June, OPEC has begun to gradually relax its production reduction agreement. At a meeting last week, OPEC gave Iraq and other countries that had previously failed to comply with the deal more time to implement production cuts to make up for past overproduction. Officials familiar with Iraq’s crude export plans said the decision would allow Iraq to produce and sell more oil while complying with the production-cut agreement.
Like many other OPEC members, Iraq’s economy has been hit hard by the collapse in oil prices. The International Monetary Fund estimates that Iraq’s budget deficit will reach 22% of gross domestic product (GDP) this year, higher than any other country in the Middle East and North Africa.
In addition to Iraq’s increase in oil exports, there is also news that Libya will increase its oil exports. Libya’s national oil industry has been nearly at a standstill since January amid concerns over the civil war. However, with the truce agreement reached in Libya, Libya’s crude oil production is gradually returning to normal. The Libyan National Oil Company stated that daily production will reach 260,000 barrels.
Goldman Sachs predicts that Libyan oil exports may double to 550,000 barrels by the end of this year, while Bloomberg Intelligence believes that this number may be closer to 1 million barrels.
From a global market perspective, this may not seem like much, however, since OPEC+ implemented large-scale production cuts in April, any news of increased production will have a negative impact on crude oil prices. Downward pressure. If Libyan oil production resumes smoothly, this means an increase of nearly one million barrels of oil per day. Coupled with Iran also increasing oil exports, this will be a double blow to crude oil bulls. </p
