The success of a proposal for the world’s biggest producers to freeze crude output hinges on unified support, Iraq’s oil minister said, a day after fellow OPEC member Iran called the plan “ridiculous.”
“If some people freeze and others raise, then this is not a good policy,” Iraq’s Oil Minister Adel Abdul Mahdi said in an interview in Tokyo on Wednesday. “So we have to reach a complete agreement.”
The proposal was announced last week as producers seek to boost oil that is trading near $30 and fell to a 12-year low in January amid a global glut. Iran’s oil minister said the accord – backed by Saudi Arabia, Russia, Qatar and Venezuela – placed “unrealistic demands” on the Persian Gulf producer, the ministry’s news agency Shana reported Tuesday.
Iran is seeking to boost oil output by 1 million barrels a day within a year after sanctions were lifted in January. Saudi Arabia said it won’t cut oil production because it doesn’t trust other countries to join in, insisting instead that high-cost producers ought to bear the burden of reducing the current surplus.
Crude has lost more than half its value since the Organization of Petroleum Exporting Countries decided in 2014 not to cut output in an effort to defend market share amid a global oversupply. The surplus is 1.7 million barrels a day, Iran’s oil ministry news service Shana reported Wednesday.
Iraq is ready to cooperate on the output freeze, Falah Al-Amri, chairman of Iraq’s state Oil Marketing Organization, known as SOMO, said at conference in Abu Dhabi on Wednesday. OPEC members and non-OPEC nations “have to act together” to combat falling prices, he said. Iraq is producing 4.7 million barrels of oil a day, with exports at 4 million barrels a day, he said. That includes the northern Iraq region controlled by the Kurdistan Regional Government.
Oil markets have a “huge oversupply” that will take “months and years” to balance out, Al-Amri said. Industry spending cuts in investment because of low prices will take two or three years to result in falling supply, he said.
Iraq is negotiating with oil companies on their production targets after asking them to reduce their 2016 spending plans because of lower oil prices and cuts in government revenue. The talks may affect Iraq’s target to have crude production capacity of 6 million barrels a day by 2020, Al-Amri said.
Middle East energy producers reduced capital expenditures by 13 percent last year, led by Iraq because of “severe budgetary strain” due to the costly war against the Islamic State, the International Energy Agency said in a report on Monday. Even so, Iraq had record production last year, with growth of 650,000 barrels a day, second only to the U.S., the IEA said.