Gulf OPEC, Iraq question whether to keep deep oil cuts into 2021- sources

By Rania El Gamal, Ahmed Rasheed and Alex Lawler
DUBAI/BAGHDAD/LONDON, Oct 29 (Reuters) - Gulf OPEC producers
the United Arab Emirates and Kuwait, as well as Iraq, are
debating whether they should roll over existing oil supply cuts
into 2021, as they struggle to stick to their agreed reductions,
OPEC and industry sources said.
Their hesitance raises the possibility of reviewing output
targets when the Organization of the Petroleum Exporting
Countries meets in November to decide on its production policy
and could create further friction within the OPEC+ group that
includes allies, complicating efforts to rebalance the market
amid weak global demand.
The UAE and Kuwait have traditionally supported Riyadh's
position, but both nations are feeling the heat of tight oil
policies in 2021 as they believe the size of their output cuts
is too deep to sustain, the sources said.
Saudi Arabia, OPEC's de-facto leader, and non-OPEC Russia
are in favour of continuing with the current oil production cuts
of around 7.7 million barrels per day into next year, rather
than easing them by 2 million bpd from January as under the
current pact, OPEC sources said.
"The countries are being suffocated with those cuts, it is
very tough to continue with them next year too," said one OPEC
source.
The UAE is finding it difficult to continue the burden of
the big reductions because of its deals with international oil
companies and that the baseline production used for cuts is too
low compared with output capacity, OPEC and industry sources
briefed on the matter said.
Other sources have said the UAE and Kuwait have argued in
recent OPEC+ talks that they were not concerned about Libya's
return with a sustainable output increase in the near term,
which will make it easier for other OPEC members to raise output
as planned.
The UAE is cutting around 33% of its output potential,
pumping 2.59 million bpd, down from around 3.9 million bpd in
April before the deal, according to OPEC data.
The UAE has overproduced in August but pledged to compensate
for the rise by reducing its oil supply in the coming months.
Kuwait's production cap is at 2.297 million bpd after it had
boosted its output to around 3.1 million bpd before the deal,
meaning it is cutting about 26% of its output capacity, the data
shows.
Iraq, OPEC's second largest producer, which is required to
cut about 850,000 bpd, has talked about being exempt from the
reductions next year. "Iraq will stay committed to OPEC+ cut deal and we will keep
respecting our pledge, not only to cut production but also to
compensate for the missing months until end year," said a senior
Iraqi oil official who attends OPEC meetings.
"But, and here we have a big but, when OPEC will meet again
to discuss 2021 plans it will be difficult for Iraq keep cutting
output and exports with the same agreed share in 2020 because we
are suffering a financial crisis which threatens the possible
collapse of the Iraqi economy," said the official.
"All OPEC members must understand Iraq's critical
situation... when it comes to discuss a new cut extension deal."
Iraq has failed to comply with its output targets but its
compliance has been improving as it agreed to compensate for
earlier overproduction by December.
"For the rollover to work, I think the baselines and quotas
need to be looked at again... when the name of the game is to
produce and maximise your gains,” one source from an OPEC
producing country said.

(Editing by Marguerita Choy)