News that Iraq is willing to join OPEC cuts sends prices higher

Oil prices turned positive Wednesday as Iraq said it was willing to join an OPEC cut in production. Iraq and Iran have both been holding out on joining the rest of OPEC in production cuts as the former looks for ways to fund its war against ISIS, and the latter tries to regain lost market share following the end of international sanctions.

Iraq is now prepared to cut production with the group, however, the country’s oil minister Jabbar al-Luaibi told The Wall Street Journal.

Abadi’s comments are the clearest indication so far that Baghdad will support an OPEC plan to cut production by 4% to 4.5% when it meets on November 30 in Vienna. Iraq’s cooperation will play an important role in any potential deal, which many still worry may not materialize at the end of the month.

wti-and-brent-nov-23

Source: Bloomberg. WTI and Brent crude oil prices for Nov. 23, 2016

“OPEC are dominating everything in the market,” Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC who helps manage $14.1 billion, told Bloomberg. “Iraq and Iran are critical to a deal and have been the two question marks. Expectations of a deal are probably higher than before any meeting.”

The future of oil prices

“The next week will be critical in determining the short-term future of oil prices,” said Adam Wise, who helps run a $7 billion oil and natural gas bond and private equity portfolio at John Hancock.

The group agreed to a collective production cut of between 32.5 MMBOPD and 33 MMBOPD in September, saying it would work out individual quotas before the November 30 summit. OPEC pumped 33.8 MMBOPD in October, according to the International Energy Agency. Iraq wants OPEC to cut output by 900 MBOPD a day because low prices are hurting global investment in the industry, Al-Abadi said.


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