Iraq’s Oil Prices Rise For Third Month But Still Too Low

The world oil market is slowly recovering due a combination of OPEC+ production cuts and countries opening up their economies during the COVID-19 pandemic. As a result, prices for Iraqi crude rose for the third month. They are still too low for the most oil dependent country in the world however.

 

In July Iraq exported an average of 2.763 million barrels a day. That was down from 2.816 million barrels in June. The drop was due to Iraq slowly complying with OPEC production quotas. Iraq agreed to produce 3.592 million barrels a day starting in May, and then promised to make even deeper cuts from July to September to make up for its overproduction in previous months. In June the Oil Ministry reported it pumped 3.698 million barrels a day, while OPEC believed it actually produced 3.716 million. Baghdad has cut its output but is still off its mark and will likely never fully comply as it has never done so in previous years. That’s because of the contracts it has with oil companies prevent it from making deeper reductions, it needs oil to fuel its power plants, and petroleum is its main source of income.

 

The overall drop in supply internationally has helped prices recover. In July a barrel of Iraqi crude sold for $40.70, up from $33.86 in June, $21 in May and a low of $13.80 in April. That earned the country $3.487 billion in July, the most since $5 billion in February.

 

The higher revenue is still not enough to pull Iraq out of its worst economic crisis since 2003. If Iraq averaged $40 a barrel throughout the year it would earn around $39 billion. It needs $50 billion a year just to cover its salaries and pensions at 2019 levels. Analysts also don’t expect oil prices to go up much more from the current level, which means Baghdad could be running an unsustainable budget and deficit for the foreseeable future. There is no sense of urgency in the government however as the elite believes prices will eventually go up and things will return to normal.

 

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	3.438	$13.80	$1.423
May	3.212	$21.00	$2.092
Jun	2.816	$33.86	$2.861
Jul	2.763	$40.70	$3.487
2020 Totals	3.188	$36.22	3.434

 

SOURCES

 

NRT, “Iraq’s Oil Exports Average 2.76 Mln BPD In July, Says Ministry,” 8/1/20

 

Saadi, Dania, “IRAQ DATA: Oil exports fell 2% in July ahead of pledge to meet OPEC+ cuts,” S&P Global, 8/2/20

- “June but was still above OPEC+ quota,” S&P Global, 7/12/20

 

Tabaqchali, Ahmed, “How Demographics Erode the Patronage Buying Power of Iraq’s Muhasasa Ta’ifia,” Arab Reform Initiative, 7/30/20

 

Van Heuvelen, Ben, “Production falls further as Iraq pursues OPEC compliance,” Iraq Oil Report, 7/14/20

 

Xinhua, “Iraq exports over 85 mln barrels of crude oil in July,” 8/2/20