Wednesday, September 18, 2019

Iraq Oil Exports Increase As Country Violates OPEC Quotas


August 2019 was the second month in a row that Iraq’s oil exports grew. That’s due to the country not following OPEC production quotas. At the same time prices dipped down to around $50 per barrel for the first time in seven months. Fears of an economic slowdown and overproduction of petroleum has led to prices to stall throughout the year.

In August, Iraq exported an average of 3.603 million barrels a day. That was up from 3.52 million in June and 3.566 million in July. In August the nation produced a record high 4.88 million barrels a day, up approximately 100,000 barrels a day from July. That happened to be a violation of OPEC quotas meant to limit production to raise prices. Iraq’s quota is set at 4.51 million barrels. The country has not followed previous agreements made by the organization either. Oil Minister Thamir Ghadban has repeatedly said that the government, which gets roughly 90% of its revenue from petroleum needs as much income as possible to pay for rebuilding after the war with the Islamic State. Last year however only 0.5% of its spending was for reconstruction. A more likely reason is that for over a decade now Iraq has said it wants to expand its oil industry and its share of the international energy market to become a world leader in the field.

The problem for Iraq is that the petroleum business ebbs and flows and right now has plateaued and might be in for a decline. Iraqi crude sold for $56.70 per barrel in August. That was down from $61.15 in July. This was the first time the nation’s oil was in the $50 range since January. There was some hope that markets were recovering and there might be a larger than expected growth this year, but overproduction and now fears of a recession coming have meant those hopes have gone unrealized. For the year Iraq has averaged $61.66 per barrel, which is below 2018’s average of $65.61.

Likewise, revenues have been relatively flat this year. In August Iraq made $6.342 billion, down from $6.692 billion in July. For two months, April and May it made over $7 billion per month, but for the year it’s averaged $6.626 billion each month, which was below the $6.953 billion per month mark set in 2018.

With more and more indicators coming out that an economic global slowdown is coming these factors will not change and prices will likely continue a slow decline. Iraq’s cheating on its OPEC quota is not helping with the organization’s desire to shore up prices during this period. This could lead to serious budget problems again. Every time oil markets recover the government boosts spending mostly on government salaries and pensions, and then when prices drop that leads to large deficits and increasingly foreign borrowing. The politicians have shown absolutely no control over spending as they rely upon the public sector in their patronage networks to stay in power. Thus, Iraq will continue to follow this pattern of too much spending and then deficits, borrowing and debt.

Federal Oil Exports, Prices, Revenues 2014-2019
Month
Avg Export (Mil)
Avg Price
Earnings (Bil)
Jan 2014
2.228
$102.37
$7.073
Feb
2.799
$102.05
$7.9
Mar
2.396
$101.03
$7.507
Apr
2.51
$100.69
$7.582
May
2.58
$100.69
$8.077
Jun
2.423
$102.96
$7.47
Jul
2.442
$102.27
$7.8
Aug
2.375
$97.44
$7.172
Sep
2.542
$90.76
$7
Oct
2.461
$81.12
$6.19
Nov
2.51
$70.40
$5.238
Dec
2.94
$57
$5.195
2014 Totals
2.517
$92.39
$7.017
Jan 2015
2.535
$41.45
$3.258
Feb
2.597
$47.43
$3.449
Mar
2.980
$48.24
$3.449
Apr
3.077
$51.70
$4.8
May
3.145
$55.87
$5.447
Jun
3.187
$55.32
$5.289
Jul
3.105
$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
3.216
$29.84
$2.92
2015 Totals
3.003
$44.81
$4.094
Jan 2016
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
3.2
$37.78
$3.748
Jun
3.175
$40.36
$3.845
Jul
3.203
$38.28
$3.802
Aug
3.229
$29.24
$3.928
Sep
3.276
$38.89
$3.822
Oct
3.384
-
$4.426
Nov
3.47
$40
$4.216
Dec
3.52
-
$5.074
2016 Totals
3.302
-
$3.625
Jan 2017
3.321
-
$5.002
Feb
3.270
-
$4.514
Mar
3.258
$47.18
$4.766
Apr
3.253
$47.27
$4.607
May
3.261
$47
$4.623
Jun
3.273
$42.07
$4.144
Jul
3.230
$43.80
$4.386
Aug
3.216
-
$4.608
Sep
3.24
-
$4.882
Oct
3.346
$52.59
$5.456
Nov
3.502
$59.19
$6.021
Dec
3.535
$59.35
$6.504
2017 Totals
3.309
-
$4.959
Jan 2018
3.490
$63.29
$6.847
Feb
3.426
$60.14
$5.770
Mar
3.453
$59.95
$6.418
Apr
3.340
$64.60
$6.502
May
3.489
$69.80
$7.551
Jun
3.521
$69.32
$7.323
Jul
3.544
$69.16
$7.532
Aug
3.583
$69.65
$7.735
Sep
3.56
$74.15
$7.919
Oct
3.478
$73.38
$7.908
Nov
3.377
$61.09
$6.195
Dec
3.726
$52.80
$6.234
2018 Totals
3.498
$65.61
$6.953
Jan 2019
3.649
$56.15
$6.367
Feb
3.621
$60.83
$6.179
Mar
3.377
$63.80
$6.709
Apr
3.466
$67.41
$7.021
May
3.572
$66.68
$7.329
Jun
3.52
$60.58
$6.372
Jul
3.566
$61.15
$6.692
Aug
3.603
$56.70
$6.342
2019 Totals
3.546
$61.66
$6.626

SOURCES

Xinhua, “Iraq exports over 111 mln barrels of crude in August: ministry,” 9/1/19

Kullab, Samya, “Total Iraqi oil exports rise to 4.077m bpd in August,” Iraq Oil Report, 9/4/19

Turak, Natasha, “Iraq is pumping record oil, creating a ‘fully-blown’ migraine’ for OPEC’s cutting plans,” CNBC, 9/6/19

Hellenic Shipping News, “Iraq says it will reduce oil production starting in October,” 9/9/19

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