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More disorder among OPEC ranks comes as Iraq says that it will not likely reduce oil output because it needs funds to keep up its battle against ISIS.
Iraqi Oil Minister Jabar Ali al-Luaibi made the oil output disclosure over the weekend.“We are fighting a vicious war against ISIS,” he said, adding that Iraq should get the same [ oil production] exemption as Nigeria and Libya.
Iraqi forces are locked in a fever-pitched battle to retake Mosul from ISIS fighters. The militant group has been sending "suicide squads" from Syria to its Iraqi stronghold of Mosul, witnesses told CNN on Wednesday, as tens of thousands of Iraqi troops close in on the city.
Iraq is OPEC’s second largest producer and has actually managed to increase production despite rampant corruption, aging and poor infrastructure and its ongoing fight against ISIS. The country produced nearly 4.5 million barrels per day (bpd) in September, while it plans to increase output to 6 million bpd by 2020, giving it even more leverage within OPEC and global oil markets.
The 14-nation oil producing cartel tentatively agreed on the sidelines of an energy forum in Algiers in September to cut production by around 1%. If a production cut agreement can be reached it would be OPEC’s first since the 2008 global financial crisis. Iraq’s disclosure, however, would make it even more difficult for OPEC to reach a production cut.
November 30 is also the deadline set by Iraqi oil minister Jabar Ali al-Luaibi for international firms to submit bids to help it develop 12 "small and medium-sized" oil fields.
Iraq’s resistance to an oil production cut is also based, at least in part, on its troubled past. Baghdad has claimed for years that it was cut out of the market in the 1990s when the government of Saddam Hussein was under international sanctions, and subsequently lost its market share to rival OPEC producer Saudi Arabia.
Though at first blush it appears that Iraq is just stubbornly digging in its heels, there is more going on than meets the eye.
Iraq is "absolutely" stuck between a rock and hard place, said Bilal Wahab, a fellow at the Washington Institute for Near East Policy. “Its economic situation is so bad, it cannot afford to cut oil production, but it is also desperate for the relief that higher oil prices would likely bring,” he said.
With Iraq refusing to take part in an oil production cut, Saudi Arabia will likely have to make up the difference.
Saudi Arabia has already indicated that it might exempt Libya, Nigeria and Iran from production quotas because each of these countries are struggling with their own domestic agendas. Libya's and Nigeria's oil output has dropped due to sectarian violence, while Iran is trying to increase production to pre-sanctions levels.
