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Is Iraq Supporting Crude Oil Production Cuts?

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Iraq supports ongoing production cuts

Iraq is OPEC’s second-largest crude oil producer. On March 26, 2018, Iraq’s president said that the country supports ongoing supply cuts.

On March 22, 2018, Saudi Arabia said that it would support extending the production supply cuts into 2019. As a result, oil prices rose on March 23, 2018. The Energy Select Sector SPDR ETF (XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell ~0.6% and ~0.3%, respectively, on March 23, 2018. XLE tracks the Energy Select Sector Index. XOP tracks the S&P Oil & Gas Exploration & Production Select Industry Index.

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Iraq’s crude oil production

Iraq’s crude oil production rose by 10,000 bpd (barrels per day) to 4,440,000 bpd in February 2018—compared to the previous month, according to the EIA. The production also increased by 20,000 bpd or 0.5% from a year ago. The production is near a six-month high.

However, the production dropped by 220,000 bpd or ~5% from a record high reached in December 2016 due to ongoing supply cuts. Brent and WTI oil prices have risen ~55% since June 21, 2017, partly due to the production cuts.

The iShares Global Energy ETF (IXC) and the Vanguard Energy ETF (VDE) increased ~13.3% and 10%, respectively, during the same period. IXC follows an index of global equities in the energy sector. VDE tracks an index of energy stocks.

Iraq’s oil output capacity and production cuts 

Iraq has a crude oil production capacity of ~5,000,000 bpd. However, Iraq is producing less than the production capacity due to the ongoing production cut deal. Iraq pledged to cut the production by 210,000 bpd as part of the production cut deal.

Impact

Iraq targets to increase its oil production to 5,000,000 bpd. A rise in crude oil production and exports is bearish for oil prices.

However, higher compliance with the supply cut deal and the unplanned supply outage could be bullish for oil prices.

Next, we’ll discuss Libya’s crude oil production.

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