The growth of oil exports by Iraq, 35% will not allow the barrel to rise above $55
Aleksey Topalov
AP
Iraq calls on companies operating in the country, and increase production and exports. In addition, Baghdad is establishing relations with Iraqi Kurdistan — the only thing that will allow it to increase oil exports by 5%. However, the potential of the country is much higher — Baghdad are able to increase shipments by more than a third, which would have a severe impact on prices. The price of a barrel won’t rise above $55.
Iraqi authorities encourage foreign companies operating in the country to increase production and export of oil and gas to maximize state revenues. On Tuesday reports Reuters, citing Iraqi oil Minister Jabbar al-Laibi. In Iraq a number of international companies, including Russian LUKOIL.
The day before Bloomberg reported that Iraq intends to increase oil exports by about 5% within a few days after the agreement on resumption of exports from three projects in Kirkuk province. As stated by a member of the fuel and energy Board of the province, Fouad Hussein, the growth of shipments will amount to 150 thousand barrels per day. In July, according to the International energy Agency, Iraq has exported 3.71 million barrels per day.
Kirkuk province, oil depots which are controlled by Iraqi Kurdistan — a wide autonomy within the Iraqi state. Previously, the Kurds were supplied to Baghdad at least 250 thousand barrels per day, receiving a portion of the profits from their sale. But then the agreement has ceased to be observed, and the parties accused of breach of obligations to each other. But last week, Baghdad said that the oil dispute could be resolved.
Projects in Iraq are a number of risks, including, for example, low transparency of mining in the region, — says the head of analytical Department IK “Golden Hills – Kapital AM” Mikhail Krylov. — Finding a balance in economic relations between Baghdad and the Kurdish autonomy will significantly improve the prospects of increasing production in Kirkuk at the expense of oil from territories controlled by the Kurds”.
On the global balance of supply and demand circumsta oil, according to Krylov, a substantial impact will. However, reducing fears on the prospects for production in Iraq, which share in world production in 2016 may reach 5%. Limitation concerns, in turn, will put pressure on oil quotes.
The market has long been expecting large-scale growth of production (and therefore exports) in Iraq. Back in April a source “Газеты.Ru” in the oil industry said that low-cost projects in this country and in theory is able to give an additional 2-3 million barrels per day.
Iraq is the second largest producer in the Organization of countries — exporters of oil (OPEC), behind only Saudi Arabia. According to OPEC, in 2016, Iraq has largely increased production. If in the fourth quarter of last year it amounted to 3,846 million barrels per day in the first quarter of 2016 — already 4,598 million barrels. In the second quarter decreased to 4,523 million barrels, but in July was a new record — 4,606 million barrels a day.
By the way, the total increase in OPEC production last month was secured for the most part it Iraq and Nigeria.
Krylov warns that the growth of production in Iraq in General and new trends in relations with the Kurds in particular may complicate the development of agreements on possible freezing of the production level.
Agree on fixing the mining world leaders in the production tried since the beginning of the year, but in the end in the course of negotiations in Doha, Qatar in mid-April, the initiative failed because of Iran’s position — he refused to freeze production — and Saudi Arabia, which said that freezing should participate in all of the major manufacturers.
The last time the idea is discussed again, particularly the lobbies Venezuela, which because of the high cost of production bears the most heavy losses. While the leaders of the oil market not prepared to freeze the level of production, but this issue should be discussed in September at the International energy Congress in October during a planned meeting of OPEC. By the way, on Tuesday, the Agency Reuters with reference to sources in OPEC and the oil industry announced that Iran could maintain a joint action of producers to stabilize the oil market.
Leading expert of the Union of Industrialists of Russia Rustam Tankan notes that the production potential in Iraq is huge. In particular, this is due to one of the lowest in the middle East degree of depletion of the initial stocks.
“Last year, Iraq produced 173 million tons of oil, exports it was only about 2.5 million barrels per day, says Tankan. But the country’s potential is much wider — up to 350 million tons of annual production, increasing export capacity to 5 million barrels a day.”
This increase will have a substantial impact on the global balance of supply and demand, which in turn, hit prices. “The period of low prices will continue for some time, and should not expect any level above $50-60 per barrel,” warns Tankan. – And, most likely, the quotes will not even step over the threshold of $55″.
Last week the price of oil broke through the psychological mark of $50 per barrel during trading on Thursday exceeded $51. But then came the correction. Monday on the Intercontinental exchange (ICE) in London, the price of October futures on Brent dropped already to $49,16 per barrel. But on Tuesday the quotation went up again, and during the trading session, the price rose to $50 .
But there is a significant time — to fully exploit its production and export potential, Iraq needs to fully settle relations not only with the Kurds, but also to liberate their territory from the terrorist group “Islamic state” (banned in Russia).
