With major setbacks in the fight against ISIS in Iraq, the Obama administration has been faced with questions about its strategy. Rather than making progress as pacifying extremist militants, the conflict appears to only be deepening.
But what is remarkable is how little the crisis is affecting Iraq’s oil sector. Iraq has succeeded in steadily boosting oil output. However, the best is yet to come. Related: Could The New Silk Road End Old Geopolitical Tensions?
June could be a milestone month for the war-torn country. While unconfirmed at this point, Bloomberg reported that shipping data suggests Iraq could dramatically increase oil exports in the coming weeks. Iraq may increase oil exports by an additional 800,000 barrels per day, putting the OPEC member on track to export a record high 3.75 million barrels per day.
That will bring a flood of new oil onto an already oversupplied market, potentially pushing prices down from their recent highs in the $60-$65 per barrel range. Already the rally since March is showing some signs of weakness, but three quarters of a million barrels per day will make the glut much worse. That could present new challenges to struggling shale producers in the US. Related: Four Opportunities Presented By Stabilizing Oil Prices
Iraq is an important player in the global supply picture. Aside from the 3 million barrels per day that it has been producing, Iraq holds some of the highest potential for future growth in supplies. It is sitting on truly massive oil reserves with extremely low production costs. It is expected to be one of the largest contributors to oil supply growth in the coming decades.
The only thing that stands in its way are all the “above-the-ground” problems: dilapidated infrastructure, a dearth of investment, political gridlock – and critically – a lack of security across much of the country. ISIS has overrun much of the country north of Baghdad, but the large oil fields in the south are far removed from the fighting. Related: Oil Still At Risk Of Geopolitical Turmoil
However, Iraq has surprised many market watchers and overcome a lot of these problems to arrive at where it is today.
By Charles Kennedy Of Oilprice.com
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