Iraq is cutting oil sales to some refineries in Asia and Europe. This is along with its commitments under the OPEC Plus agreement on production cuts.
The Iraqi state oil company, SOMO, is responsible for marketing Iraq’s oil. It has informed at least six customers in Asia that their request for oil supply next month will not be fully processed. Two buyers have been told they will not receive Basra oil. Basra is an Iraqi company responsible for the oil in the south of Iraq. SOMO will try to meet their needs next month.
According to Iraqi officials, three Asian customers will receive less oil than before. Another client will get only one-third of the oil it has requested. In Europe, at least three buyers will receive less oil from Iraq next month. Only one buyer will receive the full amount of oil under the contract.
The decrease in the supply of medium and heavy oil grades in Basra occurs when there is a high demand for it. Declining OPEC Plus production and US sanctions against Iranian and Venezuelan exports have reduced the supply of these types in the market. At the same time, the demand for light oil grades is currently lower.
However, to the surprise of some buyers, SOMO put one million barrels of Basra light oil up for auction on July 15.
Iraq agreed to an OPEC Plus compensation cuts plan
Iraq has not had a brilliant track record of meeting production targets in the past. Now, it has been under intense pressure from Saudi Arabia and other OPEC Plus members to meet its commitments and reduce production.
On Wednesday, Iraq agreed to a plan to reduce production as compensation and meet the goals of the OPEC Plus agreement. It will cut output by a further 70,000 barrels per day in July, 314,000 barrels per day in August, and 313,000 barrels per day in September to make up for the lower production in May and June.
According to Bloomberg, Saudi Arabia praised Iraq earlier this week for fully enforcing its supply limit, indicating that the dispute between OPEC Plus members over fraud in production cuts has had a resolution.
Oil prices dropped amid the uncertainty on COVID-19
The coronavirus cases surged in some countries worldwide. Amid the uncertainty, crude oil prices fell.
Brent crude decreased 26 cents to $43.11 per barrel, while WTI lost 23 cents to $40.52.
The US reported a new 75 thousand coronavirus cases yesterday. Spain and Australia had the steepest daily jumps during the last two months.