Iraq cut oil exports in August

Iraq’s crude exports were cut to about 3.3 million barrels per day last month in a push for the country’s compliance with OPEC+ supply curbs.

That was down from 3.48 million barrels per day in July and 3.41 million barrels per day in June.

Reuters cited Iraq’s oil ministry as saying the country would maintain reduced levels of exports in the coming months, as well as trying to make up for overproduction and overexports since the start of the year.

Also this week, OPEC+ announced it would delay a planned partial reduction in production cuts by two months due to the downward trend in international oil prices and some optimistic factors that will soon reverse that trend.

Iraq, which is OPEC’s second-largest producer, is a regular latecomer to the cartel’s output control agreements because of its overwhelming reliance on oil revenue as a source of state funding.

In an attempt to encourage them, earlier this year the government in Baghdad changed its oil and gas investment regime from technical service contracts to profit-sharing agreements in an attempt to attract more fresh investment to its energy sector.

Under the profit-sharing contracts, the winners of the licensing rounds are given a share of the license revenue after deducting royalties and cost recovery expenses, an Iraqi Oil Ministry official told Reuters on condition of anonymity.

In contrast, traditional technical service contracts provide a flat rate for each barrel of oil produced after cost reimbursement. They generally pay foreign investors less than they would have received under production-sharing contracts.

Foreign firms operating in Iraq have complained that flat-rate technical service contracts prevent them from benefiting when international crude prices rise. These contracts become even less profitable for foreign investors when costs rise.

By Irina Slav for Oilprice.com

More top reads from Oilprice.com