Iraq Upping Oil Capacity Amid More Signs Iran Sanctions Are Working

Iraq is upping its oil capacity. File Image / Pixabay

The argument over whether the November 4 U.S. sanctions against Iran will result in a crude market tightening or other nations being able to pump more to compensate has been raging for months now; and while the Islamic republic has repeatedly argued that the sanctions won't achieve their objective of reducing exports to zero, a huge coup for the Americans came Friday in the form of China telling state-owned giants to halt Iran oil buying.

Despite its bitter trade war with the U.S. and defying analytical expectations that it would brazenly ignore the sanctions and conduct business as usual, China's government ordered China National Petroleum Corp. and Sinopec to freeze imports and that purchases may resume depending on the outcome of negotiations with the U.S.

The news was reported by people with knowledge of the matter, Beijing-based spokesmen for both companies declined to comment on the situation.

While the Chinese government has said it opposes unilateral sanctions, it is unclear if other companies under its rule will continue purchases from Iran; however, CNPC and Sinopec halting imports means Iran is losing out on sales to its top customer, following similar halts by other major buyers such as Japan and South Korea.

The news would presumably add to fears that a massive market tightening is imminent; however, also on Friday came word from Thamer Ghadhban, oil minister for Iraq, that his nation will proceed with plans to increase oil and gas production capacity.

Iraq has already added 230,000 barrels per day (bpd) of production this year to reach a record 4.66 million in September.

As the deadline for the Iran sanctions comes closer, there is no shortage of major producing nations sending reassuring signals that they can pick up any exporting slack, and the nation that spoke the loudest this week was Saudi Arabia, whose energy minister promised that the kingdom will soon raise output to 11 million bpd from the current 10.7 million, and that it was possible to increase further to 12 million bpd.