Since the landmark deal that saw OPEC+ agree to cut nearly 10 million barrels per day of oil production to clear the global gut created by the coronavirus pandemic and wreckless production on behalf of Saudi Arabia and a handful of eager producers, one thing has threatened the cartel’s success: the OPEC laggards.
And Iraq is still dragging down the rest of the group’s compliance rate, according to official Iraq production figures for July.
Iraq has been promising to stick to the production cut deal since the beginning of July, but the market mostly dismissed Iraq’s optimism. Saudi Arabia did manage to get Nigeria and Iraq to agree to make up for any overproduction in May and June—and now July—by continuing to underproduce their quota in August and even beyond.
And oil prices are ever watchful of OPEC+’s production cut performance.
But according to SOMO, Iraq—who had said it would make some headway in July towards sticking more closely to its quota—made close to zero progress in doing so.
Iraq produced 3.697 million barrels of oil per day in July, compared with 3.698 million barrels per day in June. This compares with its 3.592 quota.
In August, Iraq was originally supposed to produce 3.804 million barrels per day. But Iraq must now cut an additional 400,000 bpd to make up for the overages of the last few months.
But Iraq has a problem, and while Iraq may be willing to cut production, its semi-autonomous Kurdish region and foreign oil company presence make this tricky to implement. And without any fundamental changes, Iraq’s likelihood of hitting their target in August is about as likely as it was in July, or June, or May.
Iraq will now have to answer to OPEC’s technical monitoring committee, which will meet next week.
By Julianne Geiger for Oilprice.com
