Iraq Oil Prices Up, But Still Facing A Deficit

Iraq’s Oil Ministry recently announced that both its oil exports and revenues were up for April 2009, but it is not enough to meet the demands of the country’s budget. In April Iraq earned $2.69 billion, the largest amount this year, compared to $2.49 billion in March. 54.7 million barrels were exported last month for an average of 1.832 million barrels a day. In March 1.816 million barrels were exported a day. Each barrel went for $49.21 in April compared to $44.20 in March. An Oil Ministry official said that Iraqi oil had reached $50 a barrel on May 23. Another Ministry employee told the press that exports would rise to an average of 1.9 million barrels a day this month.

Oil Ministry’s Numbers On Iraq’s Oil Exports (Avg. Mil. Barrels Per Day)
April 09 1.83
March 09 1.81
Feb. 09 1.80
Jan. 09 1.89
Dec. 08 1.81
Nov. 08 1.76

The Oil Ministry is desperately trying to boost production since oil is estimated to account for 85% of the country’s revenue this year. The Ministry wants to increase overall output by 300,000-500,000 barrels a day by the end of the year. To accomplish this they have signed several deals recently, including one with China National Petroleum, the first major oil contract since the invasion, tenders to drill 100 new wells, and is offering up 19 major oil and gas fields to major international energy companies. The Oil Ministry is even apparently going to allow the Kurds to begin exports even though it considers the deals illegal.

Despite the modest increase in exports in April, and the expected growth in May, Iraq will not be generating enough money this year to cover its needs. The country’s 2009 budget is based upon an average of 2 million barrels a day in exports and a $50 a barrel price. It took the country five months to reach $50 a barrel, and it still has not made its export mark this year. To make up the difference the Finance Ministry will borrow $7 billion for two years from the International Monetary Fund to cover the budget deficit. The government also claims that cell phone companies owe them $1.875 billion, and want payments to begin now to add extra revenue. As reported before, the government is making massive cuts in spending across all of its ministries as a result of the deficit. Everything from services to security is going to be affected.

Iraq is still trying to pull itself out of years of wars and international sanctions. The U.S. reconstruction effort is coming to an end, and no major aid packages from either America or the international community is expected in the future. There is very little foreign investment either. That leaves Iraq increasingly on its own. Iraq’s economy is still driven by the state as well with the government being the largest employer in the country. The budget deficit will mean less opportunity for growth and jobs in Iraq as a result.

SOURCE

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