Oil: No Impact on Doha in Iraqi Resignation

Published on March 24, 2016

The resignation of Iraqi oil minister Adel Abdul-Mahdi will not have any impact on the April 17 meeting of OPEC and non-OPEC oil ministers in Doha to ratify and broaden the freeze in oil output. Deputy Oil Minister Fayyad Al-Nima will be attending in his place.

*** We still expect the Doha meeting to broaden the earlier understanding on an oil output freeze between Saudi Arabia, Russia, Qatar, and Venezuela to include 15 OPEC and non-OPEC oil producers. As we wrote earlier, the Doha meeting will exempt Iran while it works to increase its oil output through the year to get it back or close to its pre-sanctions levels (see SGH 3/14/16, “Oil: April and the Iranian Exemption”). A possible outright cut in oil output will be considered later this year, probably in the early autumn after an assessment of the supply and demand balance. ***

Iraq’s “Natural” Output Freeze

There will be no change in Iraqi oil policy change in Abdul-Mahdi’s resignation. Iraq is essentially more than willing to participate in the oil output freeze because it is already at its maximum output and struggling to keep it there due to the lack of ongoing project investments and budget problems.

The only real variables on Iraqi output at this point are the exports from the northern fields controlled by the Kurds, who are likewise struggling to keep output at current levels, and they have already pre-sold much of their output. So Iraq’s participation in the oil freeze is “natural” rather than deliberate.

Abdul-Mahdi had been under considerable political pressure for Iraq’s oil sector “deficiencies,” and had submitted his resignation last year to “better enable” Prime Minister Haider al-Abadi to make necessary reforms and to combat corruption in the oil sector. ┬áMore recently he was expected to be moved from the oil ministry to perhaps the foreign ministry as part of a broader cabinet reshuffle several weeks ago. Whether he is reappointed to that post remains to be seen.

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