Monday, May 4, 2020

Iraq’s Revenues Drop Another 50% In Apr 2020

(CNN)

In April 2020 Iraq’s oil revenues dropped by 50%. That was on top of a 40% decline the month before. This was due to the oil war between Saudi Arabia and Russia that oversupplied the globe and then the coronavirus which devastated demand. This is a huge blow to Iraq which is the most oil dependent country in the world.

In April, Iraq exported an average of 3.48 million barrels a day. That was the highest amount of the year, and the most since 3.5 million barrels in November 2019. The Oil Ministry said that it wanted to boost exports during the month in an attempt to earn as much money as possible while prices were collapsing. This was a short-term plan that added to the glut in supply.

For the month Iraqi crude sold for just $13.80 per barrel and earned $1.423 billion. For 2019 the country’s petroleum was selling for an average of $61.09 per barrel. In January 2020 it went for $60.14, then $51.37 in February down to $32.73 in March. Likewise, revenue started at $6.1 billion in January to $5 billion in February to $2.9 billion in March. In just three months Iraq has seen its profits drop by 76%. The country depends upon oil for almost all of its money. It is now not making enough to pay its basic bills. It needs $1 billion a month just to pay the oil companies, and another $4 billion for salaries, pensions, benefits, and welfare.

Iraq will be facing more problems next month as well. May 1 was the start date of OPEC’s production cuts to try to stabilize supply. Iraq agreed to reduce its output by 23%. To be able to achieve that the foreign oil companies that operate the largest fields need to reduce their operations, but Iraq has not worked out any details with them yet. While the hope is that prices will rally the lower exports will mean Iraq will be earning even less. On the other hand, Iraq has never followed OPEC agreements and may not fully comply with this one either. The bigger issue is that Iraq has a caretaker government, which means no major decisions are being made. There are no plans on how to deal with the oil crisis, which means things will largely remain the same as the economy is collapsing around it.

Federal Oil Exports, Prices, Revenues 2019-2020
Month
Avg Export (Mil)
Avg Price
Earnings (Bil)
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
$57.41
$6.413
Sep
3.576
$59.14
$6.321
Oct
3.447
$57.15
$6.121
Nov
3.5
$59.82
$6.282
Dec
3.428
$63.05
$6.7
2019 Totals
3.527
$61.09
$6.543
Jan 2020
3.306
$60.14
$6.163
Feb
3.391
$51.37
$5.053
Mar
3.391
$32.73
$2.962
Apr
3.48
$13.80
$1.423

SOURCES

Dipaola, Anthony, Cho, Sharon and Cang, Alfred, “Iraq Follows Saudi in Cutting Oil Prices, Though Not as Deep,” Bloomberg, 3/10/20

Iraq Oil Report, “As Iraq begins oil cuts, steep challenges remain for OPEC compliance,” 4/24/20

Kullab, Samya, “Iraq’s revenues plummet, raising fears of economic collapse,” Associated Press, 5/1/20

Al Mada, “The government floundering to provide salaries for employees after oil and Corona flu,” 3/28/20

Middle East Monitor, “Iraq begins reducing 23% of crude oil production,” 5/2/20

Mohammed, Aref, Rasheed, Ahmed, “Iraq faces problems cutting 1 million bpd of crude output: sources,” Reuters, 4/30/20

Van Heuvelen, Ben and Lando, Ben, “Oil revenues crash, dragging Iraq deeper into crisis,” Iraq Oil Report, 5/2/20

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