Iraq is unable to increase oil exports in response to the surge in global oil prices and Russia-related supply disruptions, Deputy Prime Minister Ali Allawi said April 19 during a visit to Washington, exacerbating the ability of OPEC+ to boost its output to compensate for production shortages that have helped lift prices to nearly $140/b.
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"It's unlikely that we can export more, but we can certainly substitute for imports of oil byproducts and gas," Allawi, who is also finance minister, said during an Atlantic Council event. Iraq "obviously [is] committed to the OPEC-mandated agreements."
He didn't disclose Iraq's current oil export capacity.
Doubts about Iraq's ability to export more crude, especially from its southern oil terminals, point to difficulties for the country to hit its OPEC+ quota. Iraq pumped 4.34 million b/d in March, up 80,000 b/d from February and slightly under its OPEC production cap of 4.37 million b/d, according to the latest S&P Global Commodity Insights survey.
March output by OPEC's No. 2 producer rose as the country's giant West Qurna 2 field returned from maintenance about two weeks early, while protests disrupted the Nassiriya field for a few days at the start of the month. Sources and satellite data indicated considerable inventory builds.
Iraq is committed to the decisions of OPEC+ members, who are monitoring the oil markets and boosting production according to scheduled increases and market needs, oil ministry spokesman Assem Jihad told state-run Iraqi News Agency on April 19.
Iraq is trying to boost its oil export capacity from the southern terminals in the Gulf where most of its crude hits global markets, but project delays to revamping infrastructure has hampered its efforts.
Iraq's export constraints are likely to add more pressure on OPEC+, which as a group has struggled to reach its quota due to some members suffering from natural declines and supply disruptions, in countries like Russia, Kazakhstan and Libya.
Crude oil production by OPEC and its allies fell in March from February for the first time in more than a year, the latest S&P Global survey found, contributing to a tightening market thrown in flux by the Russia-Ukraine war.
Western sanctions began biting into primary non-OPEC partner Russia's oil flows, and sizable disruptions in Kazakhstan and Libya also led the coalition's production lower, the survey found.
OPEC's 13 members raised output by 60,000 b/d to 28.73 million b/d, but that was more than offset by a 160,000 b/d decline by the bloc's nine allies, who pumped 13.91 million b/d.
With the net decline of 100,000 b/d, the widening gap between the OPEC+ production and quotas jumped to a record-high 1.24 million b/d -- casting further doubt on the group's ability to meet growing global oil demand, which many analysts expect to return to pre-pandemic levels in 2022.
Concerns over OPEC+ production capabilities, in combination with the Russia-Ukraine war and recovering oil demand, have helped lift the Platts Dated Brent benchmark to nearly $140/b in recent weeks, although it has since dropped due to a global stock oil release from strategic petroleum reserves, led by the US, and COVID-19 lockdowns in key consumer China.
The Platts Dated Brent benchmark was assessed on April 19 at $105.65/b, down 0.86% on the day.
OPEC+ approved on March 31 another modest oil production increase, saying it saw no need to respond to oil disruptions from the Ukraine war being waged by Russia. The OPEC+ agreement called on the 23-country producer alliance to boost output by 432,000 b/d in May.
That is a slight increase from the previous monthly increases of 400,000 b/d, but short of what analysts at S&P Global Commodity Insights forecast for Russian crude shut-ins of 2.8 million b/d from late April through to the end of 2022.
The alliance meets next on May 5 to decide on June production levels.
Allawi said that while Iraq benefits from high oil prices sustained by the Russia-Ukraine war, the costs of the conflict are also significant, including surging fertilizer, wheat and other key commodity prices.
Allawi said Iraq's reasons for staying in OPEC "have been reaffirmed recently" through the supply cut agreement driven by Saudi Arabia, which he called "a successful policy, undoubtedly."
As interim oil minister in mid-2020, Allawi had argued for a mechanism in the supply cuts that accounted for each producer's ability to withstand the supply quotas.
Allawi said any doubts around the agreement are gone now. "At this stage, it's rather foolish to pull out from a successful cartel," he said.
Iraq's waiver from the US State Department to import Iranian power supplies is often a topic when US and Iraqi delegations meet for talks. The latest waiver was issued March 24 and runs through July 22, during peak summer demand season when soaring temperatures lead to widespread power outages.