Oil in Global Economy Series: OPEC deal vs. Iraq issue

Not everyone will comply with the deal!

Soon both the financial market and the members of the OPEC might find out compliance issue with the deal agreed on last November and that is not by any member but the second largest producer in OPEC; Iraq. On last November, Iraq agreed to reduce its oil production by 210,000 barrels to 4.351 million barrels per day. The concerned are rising over the increase in deliveries of Basra oil by the national oil company, State Organization for Marketing of oil (SOMO). Just after the deal, SOMO announced that it would increase deliveries of Basra oil by 7 percent to 3.53 million barrels per day compared to the October level and it has also announced that it would increase the supply of the oil to 3.641 million barrels per day in February.

This move would add pressure on Kurdistan, which is an autonomous region to cut their production level and heighten the risk of an internal conflict in Iraq. If Kurdistan doesn’t comply with a cut in production, the actual levels of production could rise from Iraq.

So far, despite the increase in exports, Iraq has announced that it is complying with the deal. The real picture would become clearer when the January production report is released by the OPEC.