09/05/25
Iraq edging towards compliance under Opec+ pressure
Dubai, 9 May (Argus) — Iraq managed to produce just below its formal Opec+ crude
production target in April for the second month in a row, following intense
pressure from other members of the group to improve on its historically poor
compliance record. But the country still has much to do to compensate for past
overproduction. Over the last 16 months, Iraq has been among the Opec+ group's
most prolific quota-busters, alongside Kazakhstan and, to a lesser degree,
Russia. Argus estimates the country's output averaged over 130,000 b/d above its
4mn b/d target last year. This non-compliance has strained unity within Opec+
and was the driving force behind the group's recent decision to unwind
production cuts at a much faster pace than originally planned. Iraq has made
some progress on improving compliance this year, reducing production by around
190,000 b/d in the first four months of 2025 compared with the same period last
year, according to Argus assessments. Output stood at 3.94mn b/d in April, which
was more than 70,000 b/d below Baghdad's formal 4.01mn b/d quota for the month.
And in March, Iraq was 20,000 b/d below its then 4mn b/d quota. But this is far
from mission accomplished. Along with other overproducers, Iraq has agreed a
plan to compensate for exceeding formal quotas since the start of 2024, yet it
has fallen short of its commitments in that regard. April's output was almost
50,000 b/d above its 3.89mn b/d effective quota for the month, taking into
account the compensation plan. Iraq attributes its compliance issues to ongoing
disagreements with the semi-autonomous Kurdish region over crude production
levels. The oil ministry claims it lost oversight of the Kurdish region's
production since the Iraq-Turkey Pipeline (ITP) was closed in March 2023.
Despite the pipeline closure shutting Kurdish producers out of international
export markets, Argus assesses current output in the Kurdistan region ranges
between 250,000 b/d and 300,000 b/d, of which considerable volumes are smuggled
into Iran and Turkey at hefty discounts to market prices. An understanding
between Baghdad and the Kurdistan Regional Government (KRG), when implemented,
would see Kurdish production average 300,000 b/d, with 185,000 b/d shipped
through the ITP and the rest directed to local refineries. Peer pressure Despite
the challenges, it is hard to argue that Iraq is not heading in the right
direction. Pressure from the Opec Secretariat and the Opec+ alliance's de-facto
leader, Saudi Arabia, has pushed Baghdad to take some tough decisions to rein in
production, which include cutting crude exports and limiting crude intake at
domestic refineries. Kpler data show Iraqi crude exports, excluding the Kurdish
region, fell to 3.34mn b/d in January-April from 3.42mn b/d a year earlier,
while cuts to domestic refinery runs have prompted Baghdad to increase gasoil
imports to ensure it has enough fuel for power generation. Fearing revenue
constraints, Iraq is trying to persuade Opec+ to increase its output quota,
motivated by a previous upward revision to the UAE's target. Baghdad's budget
for 2022-25 includes plans to spend $153bn/yr. But this is based on a crude
price assumption of $70/bl and projected oil exports of 3.5mn b/d, both of which
now look out of date. By Bachar Halabi and James Keates Send comments and
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