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Iraq Balks Joins In OPEC Cut; Drawing More Complications On Output Deal

October 25
9:30 AM 2016

Iraq challenges OPEC's path toward a final deal to stabilize oil markets when it balked at joining efforts to trim output to prop up crude prices. The group's second-largest producer should be exempted from cutting production because it's embroiled in a war with Islamic militants, Oil Minister Jabber Al-Luaibi said Sunday at a news conference in Baghdad. Iraq currently produces more than the 4.7 million barrels a day it pumped in September, and output could rise still higher as the government urges international companies to boost production at its fields, he said. The minister disputed Organization of Petroleum Exporting Countries figures that peg Iraqi output at less than 4.2 million barrels daily.

OPEC is trying to persuade other producers to join in the group's first output cuts in eight years, a policy shift that members agreed to in Algiers. Crude plunged to a 12-year low in January, hammering the budgets of producers from Venezuela to Saudi Arabia. The price slide led OPEC to abandon its two-year-old Saudi-led policy of allowing members to pump as much as they could in an effort to protect market share.

Russia, the biggest prize in OPEC's quest for support, refused again on Sunday to commit to joining the plan. Russia can't say yet whether it will freeze or cut output as part of a final accord and is reviewing "many scenarios" to speed the oil market's recovery, Energy Minister Alexander Novak said after talks with Gulf Arab counterparts in Riyadh.

Like Iraq, Russia is seeking to ramp up output, not tamp it down. Russia is producing about 10.9 million barrels a day on average this year, according to Energy Ministry data. The latest draft of the country's energy strategy sees a potential increase in annual production from 534.1 million metric tons last year to 555 million tons, or 11.1 million barrels a day, by 2020.

OPEC pumped a record 33.75 million barrels a day in September, with Saudi Arabia accounting for 10.58 million barrels of the total, according to data compiled by Bloomberg.

Saudi Arabia's Energy Minister Khalid Al-Falih echoed comments by Novak that oil markets are improving. Even so, producers must take further action to speed the recovery, Al-Falih said in the Saudi capital.

Iraq became the fourth OPEC member -- after Iran, Nigeria and Libya -- to seek an exemption from output limits. The group aims to decide on individual levels when it meets on Nov. 30 in Vienna.

Crude prices have plunged to about half their 2014 levels as rising sales from OPEC added to new production in countries such as the U.S. and Russia. Brent crude, the global benchmark, has climbed about 38 percent this year as OPEC discussed cuts. Prices fell 0.6 percent to $51.49 a barrel at 4:55 p.m Dubai time.

Three oil fields in northern Iraq could produce at least 69,000 barrels a day if they are recaptured from Islamic State and if an export deal with the semi-autonomous Kurdish region holds together, Farid Al-Jadir, director general of state-run North Oil Co., said in an interview in Baghdad.

Iraq pumped 4.228 million barrels a day at fields controlled by the federal government, Deputy Oil Minister Fayyad Al-Nima said at the Baghdad news conference. Production at fields operated by the Kurdish regional government in northern Iraq stood at 546,000 barrels daily last month, he said. Exports totaled 3.871 million barrels a day in September, Falah Al-Amri, the head of the state oil marketing company known as SOMO, said at the conference.

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