An international institution expects Iraq's oil production to contract during 2024

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[size=52]An international institution expects Iraq's oil production to contract during 2024[/size]

[size=45]BMI Research, affiliated with Fitch Solutions, raised its forecast for Iraq's budget deficit in 2024 from 3.3% to 7%, mainly due to weak prospects for oil revenues, which represent 93% of total government revenues.[/size]
[size=45]She added that the weak revenue prospects reflect the latest decision of the OPEC+ bloc to extend voluntary production cuts until June 2024 and the ongoing disruption of crude flows from the Kurdistan region of Iraq to the Turkish port of Ceyhan.[/size]
[size=45]The report also expects budget expenditures to rise during 2024 due to the government’s ambitious spending plans, but spending is likely to fall short of the target due to weak budget implementation, according to what was reported by the Arab World News Agency.[/size]
[size=45]Iraq recorded a budget deficit of 1.8% in 2023, according to BMI estimates.[/size]
[size=45]The company said that the revised budget deficit forecast is based on more pessimistic prospects for oil production and revenues in 2024.[/size]
[size=45]The latest figures revealed that Iraq's oil revenues decreased by 15.6% in 2023, as global oil prices declined from their high levels recorded in 2022 following the outbreak of war between Russia and Ukraine.[/size]
[size=45]She added that Iraq's oil production also declined by 8.3% in 2023, according to its estimates, after OPEC+ countries announced new restrictions on production starting in May 2023, and the flow of crude oil stopped mainly from the Kurdistan region of Iraq in March 2023. In light of the dispute with Turkey, which puts pressure on government revenues in general.[/size]
[size=45]The report added that these factors will remain until the end of the first half of 2024, adding that as a result, the company’s oil and gas team reduced its expectations for Iraq’s oil production in 2024 as a whole to a contraction of 5.3%, compared to a contraction of 1.9% previously.[/size]
[size=45]The report said, “We expect that high global oil prices will partially offset the impact of lower production on oil revenues, as we expect prices to average $85 per barrel in 2024 compared to $82.2 per barrel in 2023. But we still expect government revenues to decline from 36% of According to our estimates, the gross domestic product in 2023 will reach 34.1 percent in 2024.”[/size]
[size=45]On the other hand, BMI said that the risks surrounding its expectations depend on developments in the oil sector, adding that in addition to the factors that may lead to lowering expectations, there is the possibility of oil prices falling below current expectations if global demand weakens at a greater pace. It is expected over the coming quarters, which will prompt OPEC+ to extend production cuts, which will put pressure on Iraqi oil revenues.[/size]
[size=45]The escalating political and security risks, according to the report, also pose a threat to the country’s crude production.[/size]
[size=45]“Given that we believe the government will be unable to significantly reduce current spending due to the risk of social unrest, a more aggressive decline in revenues would likely lead to a larger budget deficit than we currently expect,” the company said.[/size]
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