LONDON: Iraq's plan for higher oil exports in 2015, emerging in detail just days after OPEC shunned any output cut, will add to global over supply and is likely to entrench the reluctance of other OPEC members to curb their own supplies.
Iraq's government on Tuesday reached a temporary agreement with Kurdish regional authorities, preparing the ground for flows of 300,000 barrels per day (bpd) of Kirkuk crude exports to resume, on top of 250,000 bpd from the region's own fields.
The increase could cause unease for other members of the Organization of the Petroleum Exporting Countries unable to boost exports and receiving lower revenues for crude sales following a 40 percent drop in prices since June.
Extra Iraqi crude is set to reach a market forecast to need less OPEC oil globally in 2015 because of rising supply of U.S. shale oil and other competing sources, and no significant increase in world demand growth.
"In purely volumetric terms, it's a rather unfortunate time for prices that this is coming on," said Eugene Lindell, analyst at JBC Energy in Vienna, who added that the oil would be a "game changer" for the local Mediterranean crude market.
When OPEC met on Nov. 27, Saudi Arabia and its Gulf allies opposed calls from poorer members including Venezuela and Algeria for production cuts, sending prices plunging. Crude has since fallen further, slipping to below $68 on Monday, the lowest since 2009.
Iraqi Oil Minister Adel Abdel Mehdi expressed concern about lower prices on arrival for the meeting, but later told reporters Iraqi exports would rise in 2015 to an average of 3.2 million bpd including Kurdistan.
Before the meeting, OPEC delegates cited Iraq's rising production, as well as a lack of willingness by non-OPEC producers such as Russia, as a reason against other OPEC members cutting supply.
"If you are going to cut production and Iraq is going to increase with others from non-OPEC, then you will achieve nothing," said one.
'UNACCEPTABLE'
Kuwait's Oil Minister Ali Saleh al-Omair on Wednesday cricitized unnamed OPEC members for boosting output and said maintaining supplies was the appropriate response.
"All of them ask you to cut your production, however they increase theirs. This is unacceptable," the official Kuwait News Agency cited him as saying. "So we should maintain our marketing quotas and production to meet our needs."
Iraq is expanding its oil industry with the help of Western oil companies and has argued it should be exempt from OPEC supply restraint as it is recovering from years of sanctions and conflict.
Exports have been held back for most of 2014 because of the closure in March of Iraq's northern pipeline, which flows to the Turkish port of Ceyhan from the Kirkuk fields, due to attacks from Sunni militants from Islamic State, which controls much of the north and west of Iraq.
At present, Iraq is exporting about 2.50 million bpd from its southern fields - which have kept pumping and remained secure despite battles in other parts of Iraq - and an estimated 250,000 bpd of Kurdish shipments.
Smooth progress is not certain. Iraq has missed its targets to expand supplies in the past, but only a small increase is needed to push Iraq's exports above the record high of 2.80 million bpd set in February.
This could happen as soon as December as an initial 150,000 bpd of Kirkuk is scheduled to flow this month. The prospect of extra supplies has already put prices of competing, sour crude oils, such as Russian Urals, under pressure in the Mediterranean market.
"We might see more flows soon," said a trader with a company that buys Iraqi crude, who sees Iraq's plan to export 3.2 million bpd next year as realistic.
Comments
Comments are closed.