The oil production freeze plan was on the table since this February. While the oil price collapsed to below $30 per barrel at that time, every oil exporter concerned the future of the energy prices. China’s slowdown growth, sluggish recovery in Europe, possible several coming rate hikes in US made the picture of demand too weak to be closely measured. The April meeting ended up without any outcomes since both Iran and Saudi won’t cut the production in the future. However, this time Saudi got a surprising ally named Iraq who was considered to be on the other side.
Iraq would support a proposal for OPEC and other major oil producers to freeze output at talks in Algeria next month, Prime Minister Haidar Al-Abadi said in Baghdad.
The endorsement marks a slight shift by Al-Abadi, who was quoted by Reuters on Aug. 23 saying that Iraq still hadn’t raised production sufficiently. The country’s deputy oil minister, Fayyad Al-Nima, said the following day that Iraq would support measures to establish fair crude prices.
The OPEC will hold informal talks during an industry conference in Algiers in September, fanning speculation the group could revive an initiative with non-members such as Russia to limit output. A previous attempt collapsed in April amid political tensions between Saudi Arabia and Iran.
“Our opinion is to freeze output to support prices,” Al-Abadi said. “The drop in oil prices is causing volatility and this is harming Iraq because our revenues are based on oil.”
Iraq is the second-biggest member of OPEC, whose other major producers have signaled only qualified backing for an output accord.
Saudi Arabian Energy Minister Khalid Al-Falih said Aug. 26 that while a freeze would be “positive” for market sentiment, no “intervention of significance” is required as global markets are rebalancing by themselves.
Iranian Oil Minister Bijan Namdar Zanganeh said that the country expects to recover its market share -- eroded during years of international sanctions -- as a condition of co-operating with OPEC, according to an Aug. 26 report by news service Shana.
OPEC gave Iraq an exemption from the individual quotas imposed on members from 1998 as the country contended with years of sanctions and war. While Iraq has boosted output in recent years after signing deals with international companies, its production was still below capacity in July, according to the International Energy Agency.
Iraq has shown more willingness to co-operate with OPEC as the plunge in oil prices -- down 50 percent since 2014 -- and the fight against Islamic State battered its finances. The country has secured a $5.3 billion loan from the International Monetary Fund to stabilize its reeling economy. The nation’s current expansion plans may be difficult to reconcile with a production freeze. Iraq told international oil companies to boost output after reversing previous instructions to cut investment, Iraq Oil Report said Aug. 23.
While facing a plenty of problems, Iraq is making its efforts to rebuild the whole country. First thing goes firstly, balancing its trade business and saving more capital for expansion plan is definitely in the process.