Iraq may increase oil output further in 2016, reported Reuters, as the country prepares to sell some crude grades for as little as $30 a barrel.
The International Energy Agency (IEA) calculates that Iraq is the world’s fastest source of supply growth and a key driver of surging OPEC production.
Not only must Iraq contend with a Saudi refusal to reduce production but also the likely final removal of sanctions on Iran. “Stable to limited growth in output from Iraq would give some potential for an uptick in prices – if it were not for Iran,” said Eugene Lindell, analyst at JBC Energy in Vienna.
The prize for this contest is maintaining market share and Iraq means to rely on its southern oil fields with plans to export 3.0-3.2m b/d from the south in 2016, an Iraqi oil source told Reuters.
The source, however, would not reveal what would happen to forecast exports from Iraq’s north, which restarted in late 2014 and have grown to about 600,000 b/d, despite tension between Baghdad and the Kurdistan region.
“The Iraqis need to tell OPEC their plan for next year and the Iranians so far haven’t told anyone how much they really can pump,” an OPEC delegate said. “Production from these two countries is important for OPEC to make a decision.”
According to Trade Arabia Southern shipments jumped in June after a decision to split the crude stream into two grades, Basra Heavy and Basra Light, to finally resolve quality issues.
With payments owed to foreign oil companies mounting Iraq has to keep pumping even though its actual oil prices are even lower than the benchmarks. The official selling price of Basra Heavy in Europe is $10.40 a barrel below the Brent price for December, while trade sources say cargoes are being sold a dollar or more below OSP. That is less than $30.
As a consequence Iraq has been gaining market share against both Saudi Arabia and Russia in Europe, although the executives of the foreign companies are not optimistic about production. They have not been eager to invest more in the country and predict that production will actually decline in the second half of 2017 due to lack of investment.