Iraq ups oil price in 2010 budget, lowers exports

Iraq has increased its oil price outlook for the 2010 budget to $62 per barrel, but lowered its expectations for daily crude exports to 2.1 million barrels per day (bpd), officials said on Saturday.

The world's 11th largest crude producer derives almost all its income from oil sales and is desperate to rebuild after years of war. A steep fall in oil prices from last year's record high had punched holes in Iraq's earlier spending plans.

Iraq's cabinet has approved a 2010 budget of 78.73 trillion Iraqi dinars ($67.3 billion), based on oil exports of 2.1mbpd, down from 2.15mbpd in a previous draft budget, Iraqi government spokesman Ali Al Dabbagh said.

Parliament must next approve the spending plan.

Dabbagh said that the government had also raised its oil price outlook to $62 per barrel from $60 per barrel in the draft. Oil prices have risen in recent months, and on Friday, crude prices hit a one-year high above $78.

"It was 2.15mbpd before, but after the meeting with the World Bank in Amman last week, they believe that Iraq may not be able to reach that, and so it was reduced to a more conservative figure of 2.1m," he said.

Iraq averaged exports of about 2mbpd in September.

"$62 was chosen because reports say prices are not set to fall, but to rise, so Iraq picked this figure so there would not be a big budget deficit," Dabbagh said.

Iraq auctioned oilfield development contracts to oil majors in June and plans another round of bidding for other fields in December, however, the deals are not expected to boost output substantially for several years.

The proposed 2010 spending plan sets a budget deficit of 17.95trn dinars. Iraq aims to plug part of its budget deficit with a $5.5bn loan programme from the International Monetary Fund (IMF).

Finance Minister Bayan Jabor told Reuters that Iraq would also sell $3bn of government paper.

Some officials have said some IMF conditions may be difficult to meet. Jabor dismissed what he said was a call by the fund to cut fuel subsidies. "We have rejected that as it will affect the Iraqi people."