Page 4 - MEOG Week 21

MEOG Commentary MEOG
Saudi and Iraq pledge to rebalance markets
A flurry of announcements from Riyadh and Baghdad have taken matters forward on both the energy and diplomatic fronts.
Gulf
What:
Saudi Arabia and Iraq have come together on diplomatic and energy issues.
Why:
The present oil price crises have cried out for imaginative moves.
What next:
The closer diplomatic ties between Riyadh and baghdad should help both countries.
SAUdI Arabia and Iraq, OPEC’s biggest oil pro- ducers, have agreed to work on rebalancing the oil markets as part of their pledge to cut back more than 9.7mn barrels per day (bpd) in May and June.
The commitment by both sides followed the visit to Riyadh by Iraq’s deputy Prime Minis- ter Ali Allawi, who is also the country’s finance minister and acting oil minister, according to the official Saudi Press Agency.
Riyadh and Baghdad expressed satisfaction with the progress of the cuts, which have helped to drain inventory levels as well as steady prices above $30 per barrel this month.
OPEC’s second-largest producer Iraq, which has in the past not adhered to slashing produc- tion in line with OPEC+ agreements, pledged to cut 300,000 bpd. As has become the norm, Iraq has lagged behind other Gulf states in ful- filling its commitment to the cuts. despite hav- ing agreed to a 1.06mn bpd reduction for May and June, Baghdad has only managed to reduce output by around 400,000 bpd; the latest cuts of 300,000 will still leave Iraq more than 30% off the pace.
Unlike Kuwait and Saudi Arabia, where pro- duction is entirely state-controlled – save for their Partitioned Neutral Zone (PNZ) – Iraq has struggled to get the IOCs developing its reserves under fixed fee technical services agreements to play ball.
OPEC+ is trimming output by 9.7mn bpd in May and June and will keep drawing back supply
until 2022. OPEC’s core Arab Gulf members are, in addition, cutting an extra 2mn bpd more than their stipulated quotas.
Saudi Arabia, which leads the alliance with Russia, will also cut a further 1mn bpd of sup- ply from the markets in June, bringing its total output curbs to 4.8mn bpd. Production for the month of June for the world’s largest oil exporter is expected to average 7.492mn bpd.
Kuwait will cut an additional 80,000 bpd, while the UAE is committed to further reduc- tions of 100,000 bpd.
Iraq’s net revenue from oil, meanwhile, could fall by as much as 70% this year, as a result of the slowdown in oil demand from the coronavirus (COVId-19) pandemic and supply restrictions in place to rebalance the oil markets, according to the International Energy Agency (IEA).
Separately, Saudi Arabia’s oil and gas compa- nies would be allowed to invest in Iraq’s western Akkas gas field in Anbar Province, the coun- try’s largest, which borders Syria, Al Arabiya reported.
Iraq’s Finance Minister Ali Allawi, who is act- ing oil minister, said the country had agreed to allow Saudi companies to invest in its western Akkas gas field, Saudi news channel Al Arabiya reported on Saturday.
The news channel provided no further details. The Akkas field in western Anbar Prov- ince and bordering Syria is Iraq’s largest.
diplomatic push
In another development, Saudi Arabia and
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w w w . N E W S B A S E . c o m Week 21 27•May•2020