Iraq kicks can down the road on Opec+ compliance

Iraq exceeded its 4mn b/d Opec+ crude production target again last month, cementing its position as the group's least compliant member.

Latest figures from state-owned oil marketer Somo put production excluding output from the semi-autonomous Kurdistan region up by 160,000 b/d on the month at 3.99mn b/d in July. Kurdish output will have taken total production well above the 4mn b/d target.

Argus, which will publish its July estimate later on 9 August, put Iraq's June output at 4.2mn b/d and May's at 4.16mn b/d, including around 250,000-300,000 b/d from the Kurdistan region.

Iraq has failed to meet its Opec+ target in any month this year. Along with fellow overproducers Kazakhstan and Russia, the country outlined plans last month detailing how it intends to compensate.

Last month's increase in production reflects higher exports, partly offset by a dip in supply to domestic refineries and lower crude burn. Crude exports from the southern Basrah oil terminal averaged 3.486mn b/d in July, a 196,000 b/d increase from 3.29mn b/d in June, according to Somo, while supplies to domestic refineries fell to 467,000 b/d last month from 475,000 b/d in June.

Jordan did not receive any Iraqi crude in July, according to Somo, but both countries recently agreed to renew a crude supply agreement under which Baghdad will supply 15,000 b/d under preferential terms.

Somo said Iraq burned 61,000 of crude for power in July. This was less than in June, largely because of the establishment of the Iraqi-Turkish electricity interconnector, which will supply Iraq with 300MW of power during the summer.

"Additionally, the grid connection with Jordan, steady gas production, and imports from Iran, as mentioned in our previous reports, have helped reduce reliance on crude oil," Somo said.

Iraqi officials say efforts to compensate for exceeding the Opec+ target are complicated by a lack of visibility on production in Iraqi Kurdistan. The region ceased providing output data after a pipeline dispute between Baghdad and Turkey shut in 400,000 b/d of its exports in March last year. Sources at Iraq's oil ministry previously told Argus that it will be easier to deliver compensation cuts after the summer season ends and temperatures begin to drop.

By Bachar Halabi