OPEC’s No.2 Fails To Reach Oil Output Quota

OPEC’s second-largest producer, Iraq, is one of the OPEC+ members struggling to boost its oil production as much as its quota in the pact allows, with January output 120,000 barrels per day (bpd) lower than its production ceiling, according to data from state marketing firm SOMO seen by Reuters.

The figures from SOMO showed that instead of rising, oil production in Iraq dropped in January by 63,000 bpd from December. This was due to insufficient storage capacity, an oil official in Iraq told Reuters.

Exports from the second-largest OPEC producer after Saudi Arabia declined in January because of bad weather, maintenance of export terminals, and technical issues, the official said.

Unplanned outages and a lack of capacity to pump more led to lower or stagnant production in January at OPEC members Iraq, Iran, Angola, Congo, and Libya, a Reuters survey showed earlier this week.

Iraq and several other producers in OPEC and OPEC+ are not pumping as much as the OPEC+ pact calls for, essentially tightening the market and distorting analyst assumptions about market balances.

For half a year now, OPEC+ has actually added lower volumes to the market each month than the 400,000 bpd nominal monthly increase announced in each of the OPEC+ meeting since August 2021.

At its latest monthly meeting on Wednesday, the OPEC+ group announced another 400,000 bpd increase in production for March.

While the nominal increase is modest, as in the previous seven months, many producers within the OPEC+ group are struggling to pump to their quotas, leaving an increasingly large gap between production increase on paper and actual growth in output, which leaves the market tighter than many analysts and forecasters had anticipated just a few months ago.

Going forward, the market will be closely looking at how much of that increase OPEC+ can actually deliver, considering that half of its members have lagged in ramping up output to their quotas so far, while more producers­—with few exceptions such as Saudi Arabia and the UAE—will be struggling to raise production.

By Tsvetana Paraskova for Oilprice.com

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