Iraq committed to OPEC+, does not oppose extension of production cuts: official

Iraq is not opposed to the OPEC+ alliance extending its current production quotas, an Iraqi oil official told S&P Global Commodity Insights on May 12, clarifying comments made a day earlier by oil minister Hayan Abdul Ghani that his country would not agree to any new cuts when the group convenes June 1.

"The minister implies that further cuts will strain Iraq's economy and plans for increasing production and our commitment to upstream IOCs," the official said on condition of anonymity.

OPEC and its Russia-led allies are widely expected to roll over current quotas to help bolster the oil market, but Iraq has struggled to comply with its 4.00 million b/d target in recent months, which includes a voluntary 223,000 b/d reduction from December 2023 production levels in the most recent round of the coalition's cuts.

Iraq pumped 4.24 million b/d of crude in April, according to the latest Platts OPEC+ survey by Commodity Insights, of which 200,000 b/d is estimated to be from the semi-autonomous Kurdistan region that the Iraqi federal government says it has no purview over.

But in agreeing to a series of additional "compensation cuts" over the coming months on May 3 to make up for its overproduction since January, Iraq has said it remains committed to the OPEC+ agreement.

The oil minister Abdul Ghani had told reporters in Baghdad at an oil and gas licensing ceremony May 11 that Iraq felt it had sufficiently scaled back its production and would not agree to any new OPEC+ cuts, according to media reports.

Iraqi oil officials have told Commodity Insights that the country was extremely reluctant to reduce its production much further, as it depends heavily on revenue generated from its crude exports to finance its budget. State marketer SOMO, which on May 7 replaced its director general, exported 3.414 million b/d of crude in April, according to documents seen by Commodity Insights.

As well, many of Iraq's fields are operated under complex technical service contracts by international oil companies, such as ExxonMobil and BP, and further cuts could make Baghdad liable for remuneration for barrels not produced.

Iraq also relies on associated gas from its oil production as feedstock to its power plants.

Mike Muller, Asia head for trading house Vitol, said it was unlikely that Iraq would break policy from its OPEC+ counterparts.

"The smart money in trading circles will assume [Abdul Ghani] did not mean he was going to depart from the group and start opening the taps. Far from it," Muller said on a Gulf Intelligence podcast on May 12. The market consensus is that OPEC+ will maintain existing production cuts at their next meeting, he added.

OPEC+ members have implemented a series of production cuts since October 2022 to backstop a crude market wavering from high inflation in key economies, uneven demand recoveries from the pandemic and surging production from the US, Brazil, Guyana and other countries outside the alliance.

The most recent round comprised 2.2 million b/d of cuts from eight countries, including Iraq.