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Oil prices are set to exceed $50 a barrel early next year, thanks to the OPEC+ production agreements, although prices are still volatile because of the pandemic, Iraqi Oil Minister Ihsan Abdul Jabbar Ismaael said over the weekend.

“Prices are improving, but they are still sensitive to fluctuations caused by the repercussions of coronavirus,” the oil minister of OPEC’s second-largest producer said at an oil and gas conference in Baghdad on Sunday, as carried by Middle East Monitor

COVID-19 has crippled the oil industries, putting them in a “critical situation,” according to the Iraqi minister.

Two months ago, Ismaael was expecting oil prices to start to recover beginning in the second quarter next year, helping Iraq’s oil industry and its plans to increase production capacity. In October, the minister had forecast the average for Brent Crude prices during January-March 2021 at $45 a barrel. As a result of this expectation, Baghdad will be basing its 2021 budget on an oil price level of $42 a barrel, the minister told Iraqi daily Al Sabah.

Speaking at the Baghdad conference this weekend, Ismaael confirmed that Iraq’s budget for 2021 was based on a crude oil price of $42 per barrel.

Iraq is one of the most oil-dependent economies, even by OPEC standards, and has seen its budget revenues plummet after oil prices crashed in March. Oil revenues are critical to Iraq’s budget income, but in recent months Iraq has come under pressure from its fellow OPEC+ partners led by Saudi Arabia to stop cheating on their production quotas and finally start complying with the OPEC+ agreement.

Iraq is committed to the agreement, the minister reiterated this weekend, days after OPEC+ managed to seal  a compromise deal over its oil production policy early next year, presenting a united front of a unanimous decision after days of disagreements. The deal for increasing total OPEC+ production by 500,000 bpd in January also gives laggards in compliance – such as Iraq – time until March 2021 to compensate for their lack of compliance since May this year.