Iraq said on Tuesday that it is seeking to reduce the amount it spends on foreign oil companies as plummeting crude prices put the country in an ever-worsening economic bind.

Oil prices have fallen to below $30 a barrel and Iran's return to the market after sanctions were lifted at the weekend could put further pressure on producers.

Oil Minister Adel Abdul Mahdi said in a statement that his ministry wants to "reduce financial expenditures for foreign oil companies operating within service contracts".

He was referring to contracts in which companies are paid flat per-barrel fees.

Abdul Mahdi also emphasised the importance of doing everything possible to increase production to "cover the federal budget deficit resulting from the decline in oil prices".

Oil revenue accounts for the vast majority of Iraqi government funds.

The country's budget for 2016 is based on an oil price of $45 per barrel, meaning revenue will likely be significantly less than projected, increasing the already-signficant deficit.

Iraq has been especially hard hit by low oil prices, which come as it wages a costly war against the Islamic State group that overran large parts of the country last year.