Iraq Is Considering Ending Its Participation In The OPEC+ Deal In 2021
Iraq is considering an exception to the OPEC+ deal to reduce oil production for 2021, Reuters reports, citing sources familiar with the situation. In particular, according to a senior Iraqi official, the country's Oil Ministry and the Prime Minister's office have different opinions on whether Iraq should fully implement oil production cuts under the OPEC+ deal or request an exception for next year.
"There are big objections to Iraq continuing to participate in production cuts," an OPEC source told the Agency. He added that there had been informal talks about the need for Baghdad to seek relief from oil supply cuts in 2021, but it was unclear whether Iraq would actually take this step or not.
"Iraq has always believed that it was treated unfairly in December 2016, when it was not released (from the deal-ed.). Since the economy remains unstable due to low prices (for oil), this problem constantly arises," the OPEC source added.
These reports appeared again after the Iraqi oil Ministry denied on September 2 that Baghdad intends to ask OPEC to release the country from the implementation of the agreement to reduce oil production during the first quarter of 2021. According to the Ministry's statement, in August, the degree of implementation of the deal by Iraq "exceeded 100%", in August-September, Baghdad intends to compensate for an oversupply of production in the amount of 850 thousand barrels per day. At the same time, the representative of the Ministry noted that if Iraq is not able to compensate for the oversupply by the end of September, it will ask the OPEC+ joint Committee of Ministers to extend the compensation period until the end of November immediately after the meeting on September 17.
The new OPEC + agreements started in May with a reduction in oil production by 9.7 million barrels per day for three months. Since August, the Alliance has continued to reduce production, but in a smaller volume — by 7.7 million barrels per day for the period until the end of the year, and then — by 5.8 million until the end of April 2022. The reference point is taken from October 2018, but for Russia and Saudi Arabia — an indicator of 11 million barrels per day, from which, by analogy, there is a decrease of 23%, 18%, and 14%, respectively.
In the new agreement, OPEC+ created a so-called compensation mechanism, under which countries that did not fully meet their obligations to reduce production must compensate for their overproduction of oil by the end of September. Among these "losers" were Nigeria, Iraq, Kazakhstan, Angola, and several other manufacturers.