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Iraq’s crude oil exports jumped in the first half of February even after OPEC’s second-biggest producer pledged to cut production this month.
The group and partners including Russia are restraining supply with the coronavirus pandemic still raging. The alliance, known as OPEC+, is seeking to ensure a 66% rally in crude prices since the start of November — driven by vaccine breakthroughs — isn’t reversed.
Baghdad pledged to pump below its quota in February to make up for past overproduction. Still, the pace of its crude exports in the first half of the month, if maintained through the rest of February, indicates the country may exceed its self-imposed production target of 3.6 million barrels a day and perhaps even its OPEC+ cap of around 3.85 million.
Iraq derives almost all its income from oil and, like many other petrostates, is experiencing an economic crisis after the pandemic caused energy demand to collapse last year.
The Iraqi oil ministry didn’t immediately comment when asked about exports. The country still intends to meet its target for the full month, according to an industry official who asked not to be identified.
A separate official said the government planned to increase exports during the first half of February in anticipation that bad weather could reduce them in the second half.
Exports aren’t a direct gauge of production but give an insight into output levels. Countries can sell down stockpiled oil, which doesn’t count toward their OPEC+ quotas. Additionally, tanker-tracking figures compiled by Bloomberg are preliminary and daily averages can change over the course of the month.
Iraq may be betting the OPEC+ deal is “too important to fall apart over some failure to compensate,” said Robin Mills, head of Dubai-based consultancy Qamar Energy. “They need the revenue.”
OPEC+ Caps
The Arab nation’s daily crude exports rose to 3.44 million barrels in the first 14 days of February, according to tanker-tracking and port-agent data compiled by Bloomberg. That’s up 4.4% from January and the highest figure on a full-monthly basis since May, when OPEC+ began its unprecedented supply cuts.
If Iraqi exports remain at their current pace and the country consumes the same amount of oil domestically as it did in January, it could pump nearly 4 million barrels a day this month.
Iraq’s dire economic situation and inability to control output from fields in the semi-autonomous region of Kurdistan led it to over-produce by around 80,000 barrels daily between May and December. Only Russia has violated the OPEC+ agreement to a greater degree, according to data compiled by Bloomberg.
Brent crude futures have climbed 25% this year to around $65 a barrel, almost wiping out last year’s losses. The cuts by OPEC+ have helped spur those gains, as has a colder-than-usual winter in parts of Asia and the U.S.
