As oil markets show growing global supply concern, Iraq is signaling the jitters may be overdone.
Output from OPEC’s second-biggest producer has jumped to a record and is set to expand further, reflecting higher investment in the country’s southern fields following crude’s rally.
“Iraq has oil that’s cheap and relatively easy to produce,” Mustafa Ansari, a senior economist at Arab Petroleum Investments Corp., said in an interview in Muscat, Oman. Increased output from the south has more than compensated for a halt in production from the shuttered Kirkuk field in the north, he said.
The country pumped 4.64 million barrels a day in August, beating the previous high set two years ago, while exports matched peak levels from 2016, according to a Bloomberg survey and tanker-tracking data.
Oil has averaged more than $70 a barrel this year after the Organization of Petroleum Exporting Countries and its allies curtailed output to eliminate a global glut. But with supply threats on the rise from Iran to Venezuela, there’s mounting concern that the group’s spare capacity now won’t be sufficient be absorb any major supply shocks.
Buyers have already begun shunning Iranian barrels as the market prepares for the onset of fresh U.S. sanctions in November. Iranian oil exports fell 14 percent in August, according to tanker-tracking data compiled by Bloomberg.
“It remains unclear whether OPEC will be able to absorb a potentially massive fall in Iranian oil exports due to the U.S. sanctions,” Commerzbank AG said in a note on Monday.
The same day, Nigeria Oil Minister Emmanuel Ibe Kachikwu sought to reassure, saying Saudi Arabia and the United Arab Emirates, along with Nigeria and Angola, can bring enough oil to the market to help meet shortfalls from Iran.
Now add to that group Iraq, which is ready to ship more crude as soon as OPEC reaches an agreement on how members will share a collective supply boost, Alaa Al-Yasiri, acting director-general of the state-run Oil Marketing Co., said Wednesday.
“Spare capacity is limited and that’s creating volatility,” Apicorp’s Ansari said. “Iraq wants to take advantage of the situation in the market — with prices supported by concern over Iran — because they know that if they don’t, other countries will.”
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