Iraq produced oil at a rate of 3.62 million barrels per day in February, a 35-year high. Monthly output jumped by 530,000 bpd from a month earlier on infrastructure upgrades. The milestone led to OPEC blowing past its production quota, producing 30.49 million bpd as a bloc, or about 300,000 bpd above its target. Iraq’s strong oil gains offset lost Libyan production, where a political crisis continues to drag on its oil sector.
“The exceptional increase in February’s exports has been an unexpected boost for the country, which has struggled to meet production targets,” the IEA said. “Increased export capacity and the start-up of new production in the south holds the promise of higher output this year.”
On March 12 OPEC revised upwards its projection for annual oil demand growth by 50,000 bpd, the second month it did so. That leaves its current estimate for global demand growth at 1.14 million bpd. The big uncertainty is the extent to which the Chinese economy slows. Fears of a swift decline in growth are weighing on commodities, including oil.
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Meanwhile, OPEC also decided to cut oil exports for March to its lowest level in five months as refinery demand slows due to warming weather. OPEC announced it will cut oil shipments by 1.1 million bpd to 23.6 million bpd, through the end of the month. Refineries typically slow their operations in spring months on lower demand, and many conduct routine maintenance during this period.
Higher supplies from Iraq, lower refinery demand, improving weather in the U.S., and uncertainty over the state of China’s economy have raised worries of oversupply, which will downward pressure on oil prices over the next few weeks. On the other hand, geopolitical tension in Ukraine is preventing oil prices from falling significantly.
By Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com