Iraq walks away from $2B upfront oil deal with China

Iraq has decided against signing an oil-supply deal with a Chinese state company that would’ve seen the cash-strapped Arab nation get about $2 billion upfront, according to its oil minister.

Baghdad opted not to go ahead with the contract after oil prices rose in recent months, Ihsan Abdul Jabbar said in an interview with BBC Arabic.

Iraq, whose economy is recovering from last year's crude price crash, called on oil traders to bid for a five-year supply deal in November. Baghdad offered to supply one million barrels a month, or about 130,000 barrels a day, with buyers being paid in advance for a one-year supply.
Bloomberg reported in December that China's Zhenhua Oil Co., a subsidiary of defense contractor Norinico, had won the bid.

Preparation deals are rare in the oil world and this means that the financial situation in Iraq has improved. While the government is still fighting, its position has improved as oil prices have risen 2% since the beginning of November, standing at around $ 3 a barrel, largely thanks to the roll-out of coronavirus vaccines.

OPEC's second-largest producer sought as much liquidity as possible in January and February this year and was concerned that oil prices would not drop to $40 a barrel, Jabbar said in an interview.

GY