Oil prices are looking for direction after Iraq says it should be exempt from oil production cuts. Iraqi oil minister Jabar Ali al-Luaibi said Iraq should be exempt from any production cut because the wars it has fought since the 1980s have not allowed them to achieve their oil production destiny. He says that without the wars Iraq would be producing 9 million barrels a day.

Of course I disagree with that. Without the wars, they might be producing 12 million barrels a day. Maybe they should have thought of that before they started going to war. 

While oil traders are nervous that this may spell doom to the OPEC production cut, I see it as posturing. The argument that the Iraqi oil minister is making is not even a good one. I am sure they are just trying to get a higher quota and by asking for a crazy amount, they may get a little more consideration by OPEC members. There will be a lot more of this ahead of the November 30th meeting. Iran is now fully on board with the OPEC deal and they are saying that they will work to encourage others to take part in the deal. Maybe they should start by talking with Iraq.

But as the global market gets back in balance, does OPEC need Iraq’s cooperation anyway? Both Saudi Arabia and Russia have already said that they will cut production and Iraq may be close to a level where their production may stall anyway.  

In the meantime we are seeing global demand outstripping daily production, as we predicted would happen back in in January. Tightening markets are coming true as cutbacks in energy investment will make it hard to meet demand. Even with the addition of more oil rigs, which increased by 11 rigs last week, US oil output is struggling to maintain gains. US oil production has fallen 6 months in a row and per the EIA U.S. crude oil production, which averaged 9.4 million barrels per day in 2015, a fell to an average 8.7 million barrels per day in 2016 and will average only 8.6 million barrels day in 2017. This is not going to be enough to meet even normal oil demand growth.