SMM: according to oil traders, while trying to follow the OPEC + production reduction agreement, Iraq's oil exports will increase greatly next month.
Iraqi crude oil shipments exceeded normal levels in the spot market where shipments were made in October, according to five insiders in the Asian and European crude oil markets. The crude oil can be bought and sold on an "unlimited destination" basis, that is, it can be exported to anywhere in the world.
Several traders said the increase in crude oil shipments could mean an increase in total production and exports, which would further unbalance the already saturated oil market. General Index Ltd, an oil market research institute. It says Iraq has sent a mixed message about complying with the OPEC + agreement, which allows for an increase in oil exports.
OPEC has allowed Iraq to increase production next month, while extending the period of compensatory production cuts. But what puzzles the market is whether the increase in Iraqi exports means it may violate the new quota of 3.6 million b / d at a time when Opec is redoubling its efforts to tighten discipline.
So far, the price of spot crude oil in Iraq has remained stable, indicating that any news of increasing production will be digested by the market. Iraqi Basra light crude delivered in October recently traded at a premium of 60 cents a barrel to its official price, compared with a premium of 30 cents in September. The price of crude oil shipped this week may have fallen, with the premium falling to 30 cents or even zero, according to General Index.
An official familiar with Iraq's export plans said the new oil production would not violate quotas, and neither the Iraqi Ministry of Oil nor the state-owned crude oil seller SOMO immediately commented on next month's production and sales plans. An oil trader estimates that Iraq may supply 5 million to 10 million barrels more crude in October than usual, or 160000 to 320000 barrels per day.
Iraq produced just under 3.6 million barrels a day in August, and exports are expected to rise this month, according to oil tracking data as of mid-September.
Iraq's production is crucial to the entire crude oil market because it is OPEC's largest oil producer after Saudi Arabia. Only if OPEC members unite can they succeed in propping up oil prices.
Since the outbreak, OPEC + has been working to get its members to reach an agreement to cut production to cope with the decline in global demand for crude oil. As member states try to abide by the agreement, Saudi Oil Minister Prince Abdulaziz bin Salman has been accusing member states, including Iraq, of failing to comply with the production reduction agreement. Iraq has also repeatedly promised to implement the production reduction agreement, and its oil department reiterated its efforts to complete the production reduction agreement in a statement to reporters on Thursday.
OPEC + agreed to reduce the supply of crude oil from the market by nearly 10 million barrels a day, or about 10 per cent of normal supply, from May. This has pushed the price of Brent crude back above $40 a barrel, although the benchmark price of cloth oil is still down 37 per cent this year.
Since the end of June, OPEC has begun to gradually relax its production reduction agreement. At a meeting last week, OPEC gave Iraq and other countries that had previously failed to abide by the agreement more time to implement production cuts to make up for past overproduction. Officials familiar with Iraq's crude oil export plan say the decision will allow Iraq to produce and sell more oil while abiding by the production reduction agreement.
Like many other OPEC members, Iraq's economy has been hit hard by the collapse in oil prices. The International Monetary Fund estimates that Iraq's budget deficit this year will reach 22% of (GDP), higher than any other country in the Middle East and North Africa.
In addition to the fact that Iraq will increase its oil exports, there is also news from Libya that it will increase its oil exports. Since January, Libya's national oil industry has almost ground to a standstill because of the civil war. However, with a truce reached in Libya, crude oil production in Libya is gradually getting back on track, with Libya's national oil company saying it will produce 260000 barrels a day.
Goldman Sachs expects Libya's oil exports to double to 550000 barrels by the end of the year, while Bloomberg Intelligence believes the figure could be close to 1 million barrels.
From the global market point of view, this does not seem to be much, however, since OPEC + implemented a large-scale production cut in April, any increase in the news will put downward pressure on crude oil prices. If Libyan oil production resumes smoothly, it will mean an increase of nearly a million barrels of oil a day, coupled with Iran's increase in oil exports, which will be a double blow to the crude oil bulls.