Iraq Again Expresses Support for Extended Crude Cuts Amid "Booming" Demand for Oil

Iraq again expresses support for extended crude cuts. File Image / Pixabay

Iraq, which throughout the Organization of the Petroleum Exporting Countries' (OPEC) crude production cutback initiative this year repeatedly failed to reduce its own output, has earned considerable press for seeming to support a cutback extension; and on Thursday, Jabar al-Luaibi, oil minister for Iraq, again expressed his support for keeping curbs on global production, adding that $60 per barrel would be an "acceptable" target price for his country.

His comments were apparently taken at face value by media, possibly because they come during a concentrated wave of analysis showing that demand continues to swell and inventories keep eroding, despite U.S. shale and many foreign nations pumping at all-time highs.

The latest expert to paint a bright picture of the immediate future is John Kemp, senior market analyst, commodities and energy for Reuters, who on Thursday noted that consumption is forecast to increase by a further 1.6 million barrels per day (bpd) this year and 1.4 million bpd in 2018, "and predictions have been consistently revised higher as demand data has come in stronger than forecast; the fragmentary information which is available in near real-time all shows consumption in the United States and around the world growing strongly."

He added that "Stocks have drawn down much faster than normal - despite U.S. refineries processing record amounts of crude most weeks since April."

Kemp also pointed out that most of the remaining global surplus "is concentrated in crude rather than products, with crude stocks 146 million barrels above the five-year average but product stocks only 25 million barrels over in August."

One country that could cause the global market to tighten even further is Venezuela, whose social and economic troubles worsened on Thursday with the arrest of the the president of state oil company PDVSA's procurement subsidiary, Bariven - part of a probe into the oil corruption that has plagued the Bolivian republic.

As of press time there was also no word whether Venezuela would meet a $1.2 billion bond payment on Thursday, but whether the payment meets the deadline or is delayed, most economists are predicting a default in the medium term.

Almost absent from this week's market reporting is the very real possibility that if the experts get their wish and prices climb higher due to a tightening market, the U.S. and other countries will merely boost their output and contribute to another glut: this argument was recently reiterated by Katie Nixon, CIO of Northern Trust, who doubted that current high prices could be sustained indefinitely: "Don't disregard the fact that supply is going to come back to the market."