Iraq: Dialogue with OPEC to Raise Export Ceiling

Iraqi Oil Minister Basim Mohammed Khudhair told the official Iraqi News Agency on Thursday that the country is producing more than 5 million barrels of oil per day.

Iraq is seeking to raise its production quota set by the Organization of the Petroleum Exporting Countries (OPEC), as pressure mounts on Baghdad to increase output due to the economic fallout from the Iran war and new investments from major oil companies, which could put the country at odds with the organization.

The conflict has inflicted severe damage on Iraq, forcing it to significantly cut its exports and depriving the state of oil revenues, which accounted for 88 percent of government income last year, compared to about 55 percent in Saudi Arabia.

Khudhair noted that OPEC has assigned Iraq a production capacity of approximately 4.33 million barrels per day, even though current production exceeds the 5 million-barrel threshold. He emphasized that the Ministry of Oil is committed to the export ceiling set by the organization.

He added, “There is dialogue with the organization to raise the export ceiling, given Iraq’s unique circumstances and the nature of the conditions it has endured over the past five decades. Iraq deserves an increase in production rates to generate the necessary financial revenues for developing infrastructure and implementing government plans.”

American companies, notably ExxonMobil and Chevron, are currently negotiating in Iraq to secure investments in the West Qurna-1 and Majnoon fields, two of Iraq’s giant oil fields, as well as other fields in Dhi Qar province, to support Iraq’s plans to boost crude oil production capacity.

The price of a barrel of Kuwaiti crude rose by $2.48 to reach $88.69 per barrel in Friday trading, compared to $86.21 in the previous day’s session, according to the price announced by the Kuwait Petroleum Corporation.

In global markets, oil prices recorded a sharp weekly decline after the Republican Party, to which US President Donald Trump belongs, suffered electoral losses. This sparked hopes of a de-escalation in the US-Israeli war on Iran. However, attacks on ships in the Middle East continue to provide support for crude prices.

Brent crude fell 17 percent this week, marking its largest weekly drop since the beginning of the COVID-19 pandemic and the largest absolute decline in the London Stock Exchange Group’s data, which has been recorded since 1988.

Phil Flynn, an analyst at Price Futures Group, said, “It appears that what is happening is a partial retreat in the risk premium associated with the war.”

While the results of the US elections raised hopes of a potential de-escalation in the conflict with Iran and an increase in crude oil exports from the region, they also increased expectations of stricter US regulatory measures on the artificial intelligence sector, leading to a sharp collapse in technology stocks on Thursday.

In oil markets, signs of a supply surplus were reinforced amid declining demand, as risk premiums on spot transactions for standard Middle Eastern crude returned to levels seen before the outbreak of the conflict.

Janif Shah, an analyst at Rystad Energy, stated, “The crude oil market, according to supply and demand balance, is trending toward a state of oversupply, but quality differentials remain, as refineries strive to secure as much as they can receive compared to what is available.” He pointed to long shipping routes and the need for ship-to-ship oil transfers as alternative solutions near the Strait of Hormuz.

He added, “The market is still looking for evidence of a permanent agreement on Iran, as any negative reaction from either side could once again tighten supply and demand conditions.” Oil prices fell 8 percent on Wednesday alone, following a landslide victory for Democrats in the U.S. midterm congressional elections, and settled at their lowest level in two months.

Prices rebounded amid escalating attacks on oil tankers in the Gulf and the Strait of Hormuz, renewing concerns about supply flows from the region.

A Greek ship management company said yesterday that a sailor was killed in an explosion on the 5th aboard an oil products tanker in the Gulf, believed to have been caused by a missile attack.

Data from the UK Maritime Trade Operations indicate that attacks on oil tankers continue at a pace close to record highs.

Matt Stanley of Kpler, a company specializing in tanker tracking and energy flow analysis, said, “Oil prices do not need to reach $117 per barrel to be considered expensive, nor does a drop to $93 mean that underlying problems have disappeared.”

He added, “After more than 25 years in this field, I honestly cannot recall many weeks similar to this one.”

Dubai crude benchmark premiums in the Middle East edged lower yesterday after Saudi Arabia cut its official selling prices (OSP) for oil to Asia for December to a six-year low once again.

Saudi Aramco on Friday reduced the price of its Arab Light crude for Asian customers by $2 per barrel compared to November, selling it at a discount of $6.50 per barrel against the Oman/Dubai average, the lowest level since May 2020 during the COVID-19 pandemic.

Dubai crude spot premiums returned this week to levels prevailing before the Iran war, amid pressure from ample supplies, while declining refining margins in Asia slowed the pace of purchasing demand.