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Has Oil Finally Reached A Tipping Point?

Oil prices have languished for…

Zainab Calcuttawala

Zainab Calcuttawala

Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…

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Iraq Races To Fill The Gap Left By The Saudis

Oil rig

Iraqi oil exports topped 100 million barrels in July, but that’s still lower than the 3.93 million barrels per day rate Baghdad boasted back in May.

The latest figures from the Iraqi Oil Ministry do not include exports from Kurdistan, which reach international markets via the controversial Kirkuk-Ceyhan pipeline. SOMO, the national oil distribution company, said all the exported oil had originated from central and southern oilfields.

June data shows Kirkuk exporting 677,413 barrels, or 22,000 bpd. It remains unclear whether shipments from the area, formally under the control of the Kurdistan Regional Government (KRG), have been affected in July.

Each month, the United States accepts a larger share of Iraq’s total exports in a bid to replace the high sulphur, heavy grades of crude that Saudi Arabia used to supply. Riyadh has made lowering its exports to the U.S. a cornerstone of its strategy to lower crude inventories in the North American nation. Bloated reserves discourage American buyers from purchasing large shipments of crude from glutted international markets.

Revenues to Baghdad totaled US$4.3 billion last month. The funds should be funneled into paying for the reconstruction of Mosul and other cities formerly held by ISIS, but corruption makes it hard to tell where the they will end up in reality. Earlier in July, the government announced its victory over the illicit caliphate, which controlled Fallujah and other notable cities in Syria and Iraq at different points over the past three years. Related: Did The Arab Spring Disarm OPEC?

The war against the Islamic State overlapped with the oil price crisis, which began with the market crash in September 2014. Still, ISIS was able to build its caliphate and military from stolen fossil fuel facilities in conquered territories. At the peak of the group’s oil program, Iraqi and U.S. intelligence forces estimated that the group earned $50 million a month off of fields under its control.

Now that Iraq’s territorial integrity has returned, so has the vigor of the national oil ministry and its ambitions. As OPEC’s No. 2 producer, its reserves act as political capital in the international energy arena. Oil Minister Jabar Al Luaibi’s short tenure has been characterized by a push to produce as much oil as possible to revive the golden age of Iraqi oil wealth.

Under the banner “Arab oil for the Arabs,” the National Oil Corporation (NOC) produced roughly 1.5 million bpd prior to the U.S.-led invasion in 2003 that led to the toppling of Saddam Hussain’s Baathist regime. This figure seems low, but a series of United Nations sanctions levied against Baghdad for its invasion of Kuwait in 1990 permanently lowered output from the 3.5 million-bpd level it enjoyed before the standoff with the fellow Gulf nation. Related: Who Should Pick Up The Tab For Abandoned Oil Wells?

Oil facilities fell into deep disrepair even after the “oil for food” initiative allowed Iraq to sell small amounts of its oil to purchase humanitarian goods.

Though Baghdad’s new leadership has its faults, the nationalized oil sector has managed to approach a 4.7 million bpd output as of June. Five million barrels per day should be manageable by the end of the year, but the ongoing OPEC quotas will likely prevent any such developments.

Though the 100 million bpd July export figure for Iraq makes for punchy headlines, the overall trajectory of the country’s oil agenda in 2017 depicts a booming oil industry winding down to meet the needs of global markets.

Baghdad has come a long way since its run-in with Kuwait. Once an international pariah, Iraq has become one of the economic and industrial leaders of the post-dictatorial face of the Arab world. The end of OPEC quotas in March will only add to the nation’s ascent.

By Zainab Calcuttawala for Oilprice.com

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