Monday, August 8, 2016

Prices For Iraq’s Oil Drop In July While Exports Increased


The up and down nature of Iraq’s oil industry continued in July 2016. Exports increased, while prices for the country’s crude declined. That led to a loss in revenue. Iraq was still making more than it did at the start of the year when revenues were at a nadir due to the collapse of the international oil market, which helps the country as it is facing a huge budget deficit.

The Oil Ministry announced that Iraq exported an average of 3.2 million barrels a day in July. That was up from June’s 3.276 million barrels, and equal to May’s 3.2 million. In April the country reached its highest post-03 export mark at 3.363 million barrels a day. Officials told Iraq Oil Report that the nation has not been able to return to that level because petroleum was being sent to refineries to produce electricity during the summer heat wave.

The international oil market has apparently reached a new plateau leading to a leveling off of prices. At the start of the year, the country’s oil was going for only $22.21 per barrel. That figure went up every month afterward until reaching $40.36 in June. In July however prices went down to $37.71 per barrel. Iraqi oil will likely sell for around that amount for the next several months.

The drop in prices led to a decrease in revenue. In July Iraq earned $3.744 billion, down from $3.845 billion in June, the most the government had earned in 2016. At the start of the year, it was making only $2 bill per month. Overall, Iraq has made an average of $3.1 billion per month in 2016. That’s still not enough to meet basic costs. Iraq has an oil dependent state-run economy where petroleum provides around 90% of revenues. The government needs around $4 billion a month just to pay salaries and pensions let alone pay for the war with the Islamic State, rebuild liberated areas, pay oil companies, and fund development projects, etc. This is creating a growing deficit and forcing Iraq to seek out international loans like the one it just worked out with the International Monetary Fund. Iraq hasn’t carried out any serious reforms nor made sound economic decisions to address this problem. Until it does so it can only hope for prices to recover, and be subject to the fluctuations of the world oil market.

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
2.980
$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
$3.925
Sep
3.052
$40.32
$3.725
Oct
2.703
$39.56
$3.29
Nov
3.363
$36.42
$3.66
Dec
3.215
$29.84
$2.92
2015 Avg.
3.003
$44.81
$4.094
Jan
3.285
$22.21
$2.262
Feb
3.224
$23
$2.249
Mar
3.287
$28.40
$2.894
Apr
3.363
$33.38
$3.368
May
3.200
$37.78
$3.748
Jun
3.176
$40.36
$3.845
Jul
3.202
$37.71
$3.744
2016 Avg.
3.248
$31.83
$3.158

SOURCES

Lando, Ben, “Exports up but revenues drop in July,” Iraq Oil Report 8/1/16

Mohammed, Aref and Rasheed, Ahmed, “UPDATE 2-Iraq’s oil exports from south rose to 3.2 million bpd in July,” Reuters, 8/1/16

Reuters, “IMF board approves $5.34 billion standby arrangement for Iraq,” 7/7/16

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