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Iraq’s exemption demand can negatively affect OPEC position

Oil&Gas Materials 27 October 2016 16:49 (UTC +04:00)
Iraq’s demand to be exempted from OPEC output cut deal could have a negative impact on the organization’s position, as it could entice others to follow into the Iraqi steps.
Iraq’s exemption demand can negatively affect OPEC position

Baku, Azerbaijan, Oct.27

By Leman Zeynalova – Trend:

Iraq’s demand to be exempted from OPEC output cut deal could have a negative impact on the organization’s position, as it could entice others to follow into the Iraqi steps, Cyril Widdershoven, Middle East geopolitical specialist and energy analyst, partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend Oct.27.

“Most probably, countries such as Saudi Arabia, UAE, Qatar and Kuwait, will increase the pressure on Baghdad to be at least more silent on its overall future production strategy,” he added.

Earlier, Iraq's Oil Minister Jabar Ali al-Luaibi said his country should be exempted from output restrictions as it was fighting a war with “Islamic State” (IS, aka ISIS, ISIL or Daesh) terrorist group.

As for the possible spoilers of the output cut deal, Widdershoven noted that inside OPEC, analysts will keep an eye on the Iranian position, but the latter's position has been weakened substantially, because not only Arab producers are supporting Saudi Arabia's strategy, but also possible supporters for Iran's position, such as Nigeria, Algeria, Venezuela and Angola, have indicated that a production freeze is more convenient and functional than not doing anything at all.

Outside of OPEC is of course the US, Canada, Russia and even Mexico of influence, according to the expert.

Still, Canada and Russia have indicated to be pro-production freeze or cuts, he said, adding that for OPEC and the oil market, it would be extremely interesting if also the US would take part in the discussion.

“The problem there is the Washington administration doesn’t have anything to say about the production levels of US-based companies,” said Widdershoven.

Further, the expert pointed out that a mandatory system for the volume of oil production would be very bad for OPEC, showing options to the rest of the non-OPEC producers the way forward.

“If OPEC would regulate and set a mandatory system for its members, non-OPEC would be filling the void,” he added.

In September, OPEC producers agreed during the informal meeting in Algiers to cut down the oil output to 32.5 million barrels per day (bpd) from current production of 33.24 million bpd.

How much each country will produce is to be decided at the next formal meeting of OPEC in November.

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