Between voluntary and natural oil production cuts... How will Iraq's economy be affected?

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[size=52]Between voluntary and natural oil production cuts... How will Iraq's economy be affected?[/size]

[size=45]The Ministry of Oil confirmed its commitment to the decisions to reduce production according to the OPEC Plus agreement.[/size]
[size=45]The ministry said in a statement, “Within the framework of the Iraqi Ministry of Oil’s commitment to the decisions of the OPEC+ group aimed at achieving stability in global oil markets, the Ministry of Oil reaffirms its seriousness in adhering to the voluntary production reduction decisions that were agreed upon within the group.”[/size]
[size=45]She pointed out that "it has taken real and tangible steps to reduce production levels, while working to compensate for the quantities that exceeded the production levels set during the previous months."[/size]
[size=45]It announced that it had “submitted an updated compensation plan to the OPEC Secretariat, detailing the measures that will be taken to ensure full compliance with our commitments to the organization.”[/size]
[size=45]Oil explained that "this move by Iraq comes as a confirmation of its keenness to support the joint efforts made by the OPEC+ group to achieve balance and stability in the global oil market, and to preserve the interests of all producing and consuming countries alike."[/size]
[size=45]While Iraq's oil production decreased by about 4% for the current year 2024, according to statistics published by the English International Institute (EI).[/size]
[size=45]According to the EI report, the world's total crude oil and condensate production reached 82 million and 636 thousand barrels per day, an increase of 1.4 compared to the previous year.[/size]
[size=45]Iran has set a record in oil production among major oil producers, while most of the world's oil producers have not only increased their production this year, but have also faced a decline in production, with Iraq's oil production falling this year by 3.9%, Kuwait's by 4.3%, Oman's by 1.5%, the UAE's by 3.4%, Algeria's by 3.4%, and Russia's by 1.1%.[/size]
[size=45]Compensation plans[/size]
[size=45]Saudi Arabia, Kuwait, Algeria, the UAE, Iraq and the Sultanate of Oman announced a voluntary cut in oil production following a meeting of the OPEC Plus alliance.[/size]
[size=45]Meanwhile, OPEC+ crude oil production in July posted its biggest jump in nearly 2024, as Iraq and Kazakhstan raised output despite committing to deeper cuts, while Russia also remained well above its quota.[/size]
[size=45]The Platts OPEC+ survey from S&P Global Commodity Insights on Aug. 10 showed the group's total output rose by 160,000 barrels per day (bpd) from June, to 41.03 million bpd.[/size]
[size=45]July was the first month of compensation plans submitted by three countries that produced above capacity in the first half of 2024. Iraq pledged to cut an additional 70,000 bpd in July, and Kazakhstan pledged an additional 18,000 bpd. Russia’s compensation plan does not include additional cuts until October 2024.[/size]
[size=45]The survey found that Iraq produced 4.33 million barrels per day (bpd) in July, about 400,000 bpd above its quota. This helped OPEC output grow by about 130,000 bpd to 26.89 million bpd.[/size]
[size=45]OPEC+ has pledged to stick to its strategy of cutting output sharply through the third quarter, before gradually returning barrels to the market. But overproduction and low oil prices are threatening those plans.[/size]
[size=45]The next meeting of the Joint Ministerial Monitoring Committee, co-chaired by Saudi Arabia and Russia, is scheduled for October 2. A full ministerial meeting is scheduled for December 1.[/size]
[size=45]Prices share the decline in production.[/size]
[size=45]Oil prices fell on Tuesday (August 20, 2024) after Israel accepted a proposal to narrow differences that have hampered a ceasefire agreement in Gaza, helping ease fears of supply disruptions in the Middle East.[/size]
[size=45]Brent crude prices fell 12 cents, or $2.02, or 0.15 percent, to $77.54.[/size]
[size=45]U.S. West Texas Intermediate crude futures for the front month, which expire on Tuesday, were at $74.23 a barrel, down 14 cents, or 0.2 percent.[/size]
[size=45]The more actively traded second-month contract fell 15 cents, or 0.2 percent, to $73.52.[/size]
[size=45]Brent fell about 2.5 percent on Monday, while West Texas Intermediate crude fell 3 percent.[/size]
[size=45]Is Iraq affected?[/size]
[size=45]In April, Fitch Solutions’ BMI Research raised its forecast for Iraq’s budget deficit in 2024 from 3.3% to 7%, mainly due to weak prospects for oil revenues, which account for 93% of total government revenues.[/size]
[size=45]She added that the weak revenue outlook reflects the latest decision by the OPEC+ group to extend voluntary production cuts until June 2024 and the ongoing disruption to 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 in 2024 due to the government's ambitious spending plans, but spending is likely to fall short of target due to weak budget execution.[/size]
[size=45]Economic expert, Diaa Al-Mohsen, explains that “Iraq is a member of OPEC and therefore it is not a major player to decide to reduce the price of oil, but rather the factors of supply, demand and geopolitics are what affect oil prices.”[/size]
[size=45]Al-Mohsen points out that “since the beginning of 2024 until this month, Iraq has been selling oil at more than $82 per barrel, and thus in the first seven months there is at least $10 per barrel in surplus over its price in the budget, so Iraq has not yet sold for less than $70.”[/size]
[size=45]“It is true that there is a budget deficit, but it is not due to the decline in oil prices or production. Rather, it is the result of increased financial allocations in the budget related to salaries and investment expenditures. As for talking about the absence of salaries or a crisis, this does not make sense, because the Central Bank’s reserves are high, amounting to more than $115 billion, and this secures the local currency. Also, the news in the Middle East is tense, and any spark that occurs will raise oil prices, and this is good.”[/size]
[size=45]Oil prices fell on fears of a recession in the United States and after OPEC+, an alliance between the Organization of the Petroleum Exporting Countries and other producers such as Russia, stuck to its plan to gradually phase out voluntary production cuts starting in October.[/size]
[size=45]The International Energy Agency forecast in November that demand growth would slow in 2024, as the final phase of the economic recovery following the Covid-19 pandemic fades and gains from energy efficiency, expanding electric vehicle fleets and structural factors strengthen.[/size]
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