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Iraq is expected to export around 2.8 million b/d of crude oil
in June, as the country is determined to commit to the OPEC+
production cuts deal, according to its oil minister Ihsan Ismaae.
Crude oil exports of the OPEC's second biggest oil producer
exceeded 3.6 million b/d in May, with production having remained
above 4.2 million b/d last month, much higher than its OPEC+ quota.
Most recent data for June by IHS Markit Commodities at Sea
suggests that crude oil shipped in the first half of this month
fell to levels close to 3.2 million b/d. Iraq had exported more
than agreed to produce in May.
However, it's important to highlight that this doesn't seem to
be an easy task for Iraq, with exports during the first week of
June down to 2.9 million b/d, levels that couldn't be maintained
for long, with exports returning back to 3.6 million b/d during the
second week of June. This means shipments for the rest of the month
will need to drop to 2.35 million b/d in the second half of June
for Iraq to meet its target. This looks difficult to achieve.
The country will try to reduce domestic crude oil consumption,
switching to gas, which would allow it to export more. The energy
minister's comments supported oil prices with Dubai crude futures
moving higher on 16th June as Asian buyers digest the news of
declining flows of barrels from Iraq in July.
Iraq's government has negotiated deeper production cuts with
international oil companies that operate some of its largest
oilfields. According to sources, BP has been asked to reduce output
of the Rumaila field in the southern part of Iraq by another 10%.
This is the country's largest oil field with crude oil production
reaching 1.5 million b/d.
Baghdad also agreed with Lukoil to cut 50,000 b/d more from West
Qurna-2, after May's agreement to reduce output at the southern
field by 70,000 b/d. Total production should now not surpass
280,000 b/d. This will bring total cuts to similar levels agreed
with Exxon, which operates West Qurna-1. The first agreement
referred to 50,000 b/d in May with output to be reduced by an
additional 70,000 b/d in June.
China and India continue absorbing most Iraqi barrels, with
average shipments to China so far in 2020 standing at 1.2 million
b/d, while around 960,000 b/d have been shipped to India during the
same period. Volumes heading for China have been even higher since
early April, with an average of 1.58 million b/d, while flows to
India fell to 880,000 b/d.
Posted 16 June 2020 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime & Trade, IHS Markit
