Iraq to cut extra 400,000 b/d in Aug to compensate for overproduction

Dubai — Iraq will cut an extra 400,000 b/d in August to compensate for overproduction in the previous three months, the state oil marketer said Aug. 6, amid signs OPEC's second-largest oil producer continues to face challenges in adhering to OPEC+ cuts.

"Iraq's plan is to make an additional cut of around (400) kbd in its oil production during the month of August as a compensation to the missed performance in the past period of the OPEC+ agreement," SOMO said in a statement. "The said cut will be over and above the agreed cut for the aforementioned month."

Iraq's August quota is 3.804 million b/d, excluding voluntary extra cuts to compensate for overproduction.

Iraq had pledged to compensate for overproduction in May and June by implementing extra cuts July through September, but appears to have failed to do so in July.

Iraq's oil exports in July climbed 4.4% on the month to 3.218 million b/d, according to official ministry data and shipping agents' reports seen by S&P Global Platts, as higher shipments from the semi-autonomous Kurdish region in the north more than made up for declines from elsewhere in the country. Production wasn't provided.

Supply-demand

"This action is to highlight Iraq's high commitment to overcome all challenges that stand against the oil production cut in order to serve its ultimate goal in achieving the necessary supply/demand balance in the oil market at this time when bad effects of COVID-19 pandemic are still in place," SOMO said.

Iraq, often a laggard in terms of compliance, produced 3.698 million b/d in June, including flows from the Kurdish region, a 9% decline from 4.068 million b/d in May, SOMO said July 11. The country's May-July output quota was 3.592 million b/d.

Total exports, including those from the Kurdish region, declined 11.4% to 3.218 million b/d, from 3.633 million b/d in May, SOMO added.

OPEC and its allies, including Russia, rolled over their 9.6 million b/d in collective production cuts through July to help bolster the market as it emerges from the depths of COVID-19. As of Aug. 1, their total cuts will be 7.7 million b/d as the coalition begins to ease output curbs.