Iraq is the big holdout country that could thwart Saudi Arabia's and Iran's wish to extend the OPEC-led oil production cut by a further nine months, according to RBC's Helima Croft.
"Getting Iraq on board is going to be interesting….I think Iraq in the end will get on board but they might make it difficult along the way," said Croft, noting that the country's oil minister, Jabbar al-Luaibi, had fought hard - and ultimately to no avail - to stop Iraq from having to take the second largest hit to its production figures in the deal brokered between OPEC and non-OPEC producers last November.
Iraq's financial woes have been exacerbated in recent years by ongoing attempts to eject militants from fundamentalist jihadist group ISIS from within its borders. The country took a $5.34 billion loan last year to shore up its balance sheet yet is still struggling to pay its civil servants, according to RBC's Croft, speaking on CNBC's Squawk Box on Monday.
Iraq also remains one of the countries that could still raise production levels, says the energy analyst, highlighting the speed with which the Iraqi prime minister weakened Saudi Arabia's and Iran's declaration last week that they would back a nine-month extension to the existing agreement. Iraqi Prime Minister Haider al-Abadi said that he would back an extension but refused to commit for a determined period of time.
Saudi Oil Minister Khalid al-Falih is in Baghdad today to discuss the potential extension following his Iraqi counterpart's recent comments that he would support only a six-month extension.
Turning to oil prices which have been steadily moving higher since the start of the month on the back of speculation that the deal will be renewed and were sitting at above $50 per barrel in early trade on Monday, Croft says that she expects them to grind higher still.
However, having released the news about supporting a nine-month extension a good ten days prior to the OPEC meeting, Saudi Arabia and Iran have potentially put paid to a potential further jump in the price unless they pull another rabbit out of the hat, she adds.
"If you want a price rise they're probably going to have to go deeper. Do you roll over 1.8 million barrels or do you throw in another 500,000? That's how you'd move in significantly higher coming out of OPEC," Croft opined.
Meanwhile, traders also are focused on the reality that the ability for an output cut extension to influence demand for oil continues to be limited to an extent by the reaction of U.S. shale producers to a sustained move upwards in the price.
"The key issue is actually what's happening in the U.S. The kickstart of the shale oil production there is faster than anybody thought…, you're seeing it in the rig count, you're seeing it in the cost of production, they can drill wells at a third of the cost and in a third of the time now," Majid Jafar, chief executive officer (CEO) of Crescent Petroleum, told CNBC at the World Economic Forum in Jordan over the weekend.
Looking at the broader demand picture, Jafar said that analysts and traders need to consider a wider band of influencers.
"The key question not always in focus is China. What's really going on with their growth? Indian growth of oil demand is even faster than China's now. There needs to be a little more focus on the demand side as well to truly get a view of the overall picture," he advised.
Helima Croft, chief commodities strategist at RBC Capital Markets, speaks about the importance of Iraq in the global oil market.