Iraq to consider hedging crude oil production

ERBIL, Kurdistan Region (Kurdistan24) – The Iraqi Oil Ministry is planning to hedge oil production as part of its efforts to protect the country’s revenue against the instability of oil prices in the world market.

Falah Al-Amri, Head of the state-owned Oil Marketing Company (SOMO), on Monday said the Iraqi government might consider the hedging of its crude oil production to counter the risk of oil price volatility.

“It is in our strategy in the future that maybe we will consider hedging part of Iraqi crude...SOMO is floating an idea now, and this is yet to be studied,” Amri told Reuters.

The mechanism and type of hedging that might be considered by Iraq’s SOMO are still unclear.

According to the report by Reuters, some international oil companies hedge their sales to face short-term oil price instability.

“Short term hedging helps to smooth price fluctuations between the signing of an oil sales contract, and when the oil is delivered and paid for,” the report added.

Amri highlighted the difficulties before hedging crude production could begin, adding the Iraqi government needs to study the practice carefully.

He explained this would require the government to prepare trained human resources and bring in the best companies involved in hedging.

The Head of SOMO also said hedging crude production is something new in the country as they “still don’t understand the hedging process completely.”

Editing by Karzan Sulaivany