World News
Iraq Ramps Up Production - But Analyst Downplays Fears of Market Rebalance Delays
Just as global production outages were giving traction to the notion that the oil glut will soon abate and a fundamental market rebalance will follow, news comes that Iraq is boosting its market share along with other Middle East producers in advance of the Organization of the Petroleum Exporting Countries (OPEC) summit this week.
Sources familiar with the issue told CNBC that Iraq, which is OPEC's second-biggest producer, will supply 5 million barrels of extra crude to its partners in June, and that it has already been targeting record crude export volumes of 3.47 million barrels per day (bpd) from its southern terminals.
The sources specify that Iraq's Oil Marketing Company (SOMO) allocated 5 million more barrels of Basra Light crude loading in June to upstream partners including PetroChina, Eni, and Lukoil, and that the extra oil was given "because of the pressure from the technical service contracts contractors."
Ultimately, Iraq wants to increase its total oil output by up to a third by 2020.
Saudi Arabia, Kuwait, Iran, and the United Arab Emirates also plan to raise supplies in the third quarter, and this prompts Victor Shum, managing director of downstream energy consulting at IHS, to remark that "OPEC is indeed increasing supplies, practicing their market share first strategy."
But Shum downplays the notion that the additional output will delay a market rebalance, pointing out that the surplus could be absorbed by ongoing supply disruptions from other countries and strong seasonal demand.
While many players are excited over the chance of the market beginning to rebalance soon, oil expert John Kilduff says oversupply to the tune of 1.5 million bpd, along with the struggling economies of Asian nations as well as a potentially escalating U.S. dollar means that the market won't come "into balance until at least the first quarter of 2017, if not later."
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| VLSFO | MGO | |||
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