BAGHDAD (AP) — Iraq's oil revenues dropped by 17.6 percent from May to June due to plummeting prices in the international market and the diversion of some production to meet domestic needs, the government said Monday.
The decline in revenues challenges oil-reliant Iraq, since the violence-plagued country needs hundreds of billions of dollars for reconstruction after the withdrawal of the last U.S. troops late last year. Oil revenues make up about 95 percent of the fragile democratic government's budget.
Still, the country is rapidly expanding production to levels not seen since before the U.S.-led invasion, and it is expected to overtake Iran as the second-largest exporter in OPEC soon, especially as new EU sanctions took effect this week to punish Iran for its suspected nuclear weapons program.
Oil Ministry spokesman Assem Jihad said Iraq earned $6.453 billion in June, with an achieved average price of $90 per barrel. May's revenues stood at $7.831 billion with an average price of $103.039 per barrel.
June's oil exports averaged 2.403 million barrels a day, down from an average of 2.452 million barrels in May as the ministry diverted some production to refineries, Jihad said. Domestic demand in Iraq usually increases during the hot summer months, mainly for running private generators.
With June's figures, Iraq's oil exports yielded $45.269 billion in the first half of 2012. Iraq's 2012 budget is for $100 billion, and it is dependent on projected revenues from oil exports of 2.6 billion barrels daily at $85 per barrel.
Waning euphoria over the latest EU plans to tackle its economic and debt woes plus signs of a slowing Chinese economy dragged crude oil prices down.
On Monday, benchmark oil for August delivery was down $1.32 at $83.64 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. In London, Brent crude for August delivery was down $1.39 at $96.41 per barrel on the ICE Futures exchange.
Iraq sits atop the world's fourth largest proven reserves of conventional crude of about 143.1 billion barrels, but decades of sanctions, war, sabotage and negligence have battered the sector.
Since 2008, it has been planning to build up its energy sector to bring in the badly needed cash. It has awarded 15 oil and gas deals to international energy companies, the first major investments in the country's energy industry in more than three decades.
And now its daily oil production stands slightly over 3 million barrels — the highest level since the U.S.-led invasion to oust dictator Saddam Hussein in 2003 — and it plans to reach 3.4 million barrels by the end of this year.
Iraq initially set a target of 12 million barrels a day by 2017, but it is now considering a downward revision to fewer than 10 million barrels, in part because of infrastructure bottlenecks.