Wednesday, February 3, 2016

Iraq’s Oil Revenue Drops 45%


Iraq’s oil exports reached new highs in the last few months, but that contributed to the international oil glut. The result was that prices for Iraq’s crude have continued to plummet over the last six months crippling Baghdad’s revenues, and threatened the government’s ability to sustain itself.

In January 2015, Iraq exported an average of 3.285 million barrels a day. That was the second highest amount in the post-2003 era with only November recording more at 3.365 million. In fact the last three months have all seen very good numbers. This has been due to the opening of single point mooring facilities over the last year or so that have increased capacity in the southern Basra ports, and the marketing of the new Basra Heavy crude that has opened up new sales opportunities. This has made up for Kurdistan ceasing its foreign sales for the central government in September 2015.

The problem Iraq faces is that these new export figures have contributed to the high supply of oil on the international market leading to a collapse in prices. On January 25 for example, oil prices dropped 5% based upon Iraq’s December export figures. By the end of the month a barrel of Iraqi crude sold for only $22.21. That was half the price the nation’s oil was going for last year. The result was that the country only earned $2.26 billion for the month, 45% below its 2015 monthly average of $4.079 billion. All of the world’s major oil producers are dealing with the drop in prices the same way, maintaining or increasing production to try to earn as much as possible. That situation will only get worse when Iran re-enters the market when its sanctions are fully lifted.

Iraq is facing a huge dilemma. Over 90% of its revenues come from oil. It has a bloated public sector that has only grown over the years when it was flush with cash. It is also facing the war with the Islamic State and a huge internal refugee crisis. It is only surviving by going through its reserves, which can’t sustain the heavy spending for long. Rather than taking this opportunity to develop the private sector and cut the fat from the government, Baghdad is likely to go into debt borrowing from investors and banks, and might eventually follow the lead of the Kurdistan Regional Government and stop paying its civil workers and cutting services when its cash runs low. Like many oil dependent countries, Iraq can’t shake its addiction even during a crisis.

Iraq Oil Exports & Revenues 2015-16
Month
Avg.
Exports
Avg. Price
Per Barrel
Earnings
(Bil)
Jan
2.535
$41.45
$3.258
Feb
2.597
$47.43
$3.449
Mar
2.98
$48.24
$4.457
Apr
3.077
$51.70
$4.8
May
3.145
$55.87
$5.447
Jun
3.187
$55.32
$5.289
Jul
3.104
$50.99
$4.908
Aug
3.079
$40.59
$3.874
Sep
3.052
$40.32
$3.692
Oct
2.7
$39.56
$3.320
Nov
3.365
$36.42
$3.67
Dec
3.215
$29.84
$2.793
2015 Avg.
3.003
$44.81
$4.079
Jan
3.285
$22.21
$2.26
 

2015-16 Oil Exports From Basra
Jan 2.39 mil/bar/day
Feb 2.29 mil/bar/day
Mar 2.71 mil/bar/day
Apr 2.62 mil/bar/day
May 2.69 mil/bar/day
Jun 3.022 mil/bar/day
Jul 3.064 mil/bar/day
Aug 3.021 mil/bar/day
Sep 3.03 mil/bar/day
Oct 2.7 mil/bar/day
Nov 3.37 mil/bar/day
Dec 3.215 mil/bar/day
Jan 3.285 mil/bar/day

2015-16 Oil Exports By Kurds For Baghdad
Jan 153,000 bar/day
Feb 306,000 bar/day
Mar 268,000 bar/day
Apr 450,000 bar/day
May 451,000 bar/day
Jun 164,733 bar/day
Jul 41,000 bar/day
Aug 50,900 bar/day
Sep 21,500 bar/day
Oct 0.0
Nov 0.0
Dec 0.0
Jan 0.0

SOURCES

Kumar, Devika Krishna, “Oil hit again after Iraq supply adds to glut,” Reuters, 1/25/16

Reuters, “Iraq’s January oil exports rise slightly,” 2/1/16

Van Heuvelen, Ben, “Iraq exports rebound but oil price does not,” Iraq Oil Report, 2/2/16

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