The price of Brent crude oil hit $62 per barrel on Saturday, the highest it has been since the global oil price crash of last year – good news for the Iraqi economy, which is heavily dependent on oil.
The rise in the price of oil also comes as Iraq’s parliament is in the process of passing a deficit-laden federal budget bill for 2021.
“With the increase, the extra money Iraq makes will either contribute to reducing the deficit in the bill, or will be added into the bill as extra revenue,” Sherwan Mirza, a member of the Iraqi parliament’s finance committee told Rudaw English on Saturday.
Iraqi parliament’s finance committee decided last month to place the price of oil at $45 per barrel, a $3 increase from what the government had initially put in the budget in December. The deficit in the federal budget bill currently stands at just under 30 trillion dinars (approximately $20.7 billion) – far less than the initial deficit of 71 billion dinars (approximately $49 billion), but still a heavy burden.
The price of US crude oil dropped to negative value and Brent oil to below $20 a barrel in April 2020 as a result of a price war between major oil producers Russia and Saudi Arabia and a crash in global demand for oil because of the coronavirus pandemic. Prices struggled to bounce back for most of 2020 as the pandemic persisted.
Like some other oil producers, Iraq was hit hard because it had to reduce production as per an OPEC+ agreement in April.
Countries like Iraq and Russia, who had previously overproduced oil, had to make extra cuts in their production in the months following the April agreement.
In order to make up for excess production, Iraq pledged in September that it would cut an extra 400,000 barrels per day, on top of the 850,000 already designated by OPEC+.
The global drive to vaccinate against the coronavirus has brought optimism that oil consumption will bounce back to pre-pandemic levels.
“Prices are expected to increase even further and hit even $65, since many countries have started vaccinating their citizens and demand is once again increasing,” Erbil-based oil and gas analyst Arshad Taha told Rudaw English on Saturday.
“Even if Iraq does not start vaccinating – as long as oil-demanding countries do so, Iraq will be in a good economic situation and fill the deficit in its budget,” Taha added.
