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Iraq backs OPEC+ output hike from August, extension of pact beyond April 2022

Highlights

OPEC+ ministers set to meet July 5 to resolve impasse

Saudi and UAE disagree over extension of current pact

Iraq is OPEC's second biggest producer

Iraq supports the proposal to increase OPEC+ production between August and December and backs the extension of the output cuts agreement till the end of 2022, the country's oil minister said July 4, as ministers prepare to meet to resolve an impasse spilling over from last week's meeting.

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The OPEC+ coalition was set to agree last week to boost collective crude output by 400,000 b/d each month from August to December and extend their supply management agreement through the end of 2022. But the UAE has stymied the agreement by insisting its baseline production level from which its quota is determined should be raised, which other countries have said is unfair, delegates told S&P Global Platts.

"Iraq supports the opinion to extend the OPEC+ production cuts agreement till December 2022 and the start of adding increments from August 2021, depending on the demand and needs of the oil market," Ihsan Ismaael said in a ministry statement carried by state-run Iraqi News Agency.

Saudi-UAE standoff

Gulf neighbors Saudi Arabia and the UAE appeared on July 4 no closer to compromising on the output accord as energy ministers from both countries took to the airwaves to declare their positions, which have not budged. Saudi Arabia wants to tie a series of monthly OPEC+ production increases to lengthening the group's supply management pact through the end of 2022, while the UAE insists that its output target be increased before signing off on the extension.

The impasse has left an oil market thirsting for crude on tenterhooks since the talks began July 1, with many forecasters warning of a potential price spike if the 23-country alliance does not further unwind its production cuts. The coalition, currently withholding 5.8 million b/d of output, plans to reconvene July 5 at 3 pm Vienna time (1300 GMT).

Failure to reach a consensus -- all OPEC+ decisions must be unanimous -- would revert the alliance to its existing production agreement, under which output quotas would remain flat at July levels. That would squeeze an already tight market, as global economies continue to recover from the pandemic, boosting oil consumption.