Last week’s oil price hike proved to be short-lived on Monday, after Iraq’s withdrawal from any OPEC deal to freeze output caused prices to fall.
Iraqi oil minister Jabar Ali al-Luaibi made it clear that Iraq will not be participating in any OPEC deal limiting oil production, but did say it would encourage other members to participate in an output freeze. Iraq is the second largest OPEC producer after Saudi Arabia and their lack of support will likely make any agreement less effective.
Falah al-Amiri, head of Iraqi state oil marketer SOMO, said that wars had affected Iraq’s ability to reach peak production:
“We should be producing 9 million [barrels per day] if it wasn’t for the wars,” he said.
Iraq’s withdrawal from talks comes just days after Russia reiterated its commitment to an OPEC agreement. Russian officials said on Friday that Moscow are more likely to agree to freeze oil production rather than an an outright cut, despite its capability to increase oil output by a further 4 million barrels per day.
WTI Crude is currently trading down 1.12 percent at $50.28, with Brent Crude down 0.7 percent at $51.42.
The next OPEC meeting is scheduled for November 30th and is likely to discuss individual production quotas, with the aim of limiting production by the entire group to 33 million barrels a day.
Analysts are hopeful that the oil market may be beginning to rebalance, after nearly a year of oversupply. Barclays bank said in a note to clients on Monday:
“The market moved into a small deficit in Q3, will remain so in Q4 and then the deficit will expand significantly in 2017.”