Iraq and Iran energy ministers say they support extending oil output cuts for 9 months

Key Points
  • Iraqi Oil Minister Jabbar al-Luaibi and his Iranian counterpart Bijan Zanganeh both expressed support for a nine-month extension to OPEC-led production cuts.
  • OPEC members are meeting in Vienna to negotiate the terms of rolling over a deal to remove 1.8 million barrels a day from the market.
  • Iraq and Iran are the second- and third-largest producers in OPEC, respectively.
Iraqi oil minister: We're 'very happy' with nine-month output cut
Iraqi oil minister: We're 'very happy' with nine-month output cut

The oil ministers of Iraq and Iran both told CNBC on Wednesday that they're ready to back a deal to extend OPEC-led production cuts through the first quarter of 2018.

OPEC is meeting in Vienna to discuss rolling over its six-month deal with 11 other exporters to remove 1.8 million barrels a day from the oil market in order to shrink global crude stockpiles. Consensus has formed in recent weeks around a nine-month extension, along the lines of a plan agreed to last week by Saudi Arabia and Russia.

Iraq and Iran are critical because they are the second- and third-biggest producers, respectively, in the 13-member cartel — and both have presented obstacles to getting a deal done in the past.

On Wednesday, Iraqi Oil Minister Jabbar al-Luaibi said Iraq is "very happy" to go along with the extension, but he cast doubt on the odds of OPEC agreeing to deeper production cuts — which some analysts now believe is necessary.

Jabbar al-Luaibi, Iraq's oil minister, arrives for the 171st Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Wednesday, Nov. 30, 2016.
Akos Stiller | Bloomberg | Getty Images

"I don't think so. It's only the freeze we are talking about. We will continue with the current cuts," Luaibi told CNBC in Vienna. "We will continue to discuss this."

Asked whether Iraq plans to improve its compliance with the deal, he said, "definitely."

As of April, Baghdad had still not achieved its promised output reductions of 210,000 barrels a day from the October reference level, according to figures in OPEC's monthly report. Earlier this week, Luaibi said Iraq was now producing at its quota.

Iranian Oil Minister Bijan Zanganeh said either a six- or nine-month extension would be acceptable.

"We think, based on the consultations we have had and the reports we have received, it's a unanimous idea to continue the cut we decided in December," he told CNBC.

Iran oil minister on OPEC's nine-month output cuts
Iran oil minister on OPEC's nine-month output cuts

Under that deal, Iran was allowed to raise production to a certain level, as it tries to rebuild its export business following the end of sanctions against the country. Asked whether Tehran would agree to cut production outright, Zanganeh did not answer directly.

"It's important for OPEC and non-OPEC participants in the agreement to comply fully. It's very important. Now we have had very good compliance. We need to comply with this decision for any period of time," he said.

Last year, Iran balked at capping its production until virtually the last moment. Around the same time, Iraq suggested it should be exempt because it needs oil revenue to fight Islamic State militants entrenched within its borders. Baghdad also quibbled over how OPEC would measure production cuts.

Even as recently as last month, the leader of Iraq's ruling Shiite Muslim coalition was renewing calls for an exemption. Luaibi signaled his support for a nine-month extension on Monday following an impromptu meeting with Saudi Oil Minister Khalid al-Falih.