With what has now become habitual optimism, the Iraqi oil minister, Jabar al Luaibi, said he expected the global oil market to rebalance by the end of the first quarter of 2018. That’s despite Iraq’s own inability to reach the production quota assigned it by the cartel last year.
“I am optimistic, and during the first quarter of next year there will be more balance between supply and demand, which will reflect positively on improving global oil prices,” Al Luaibi told media, noting that global crude oil inventories had already been reduced to more palpable levels from a massive overhang in 2014.
The minister, however, acknowledged that a further rise in U.S. oil production this month “might” have an effect on prices. That statement comes after earlier this month Al Luaibi said he expected Iraq’s oil production to hit 5 million bpd in the first quarter of 2018: around 650,000 bpd above the country’s production quota under the cut deal. This suggests Iraq likely expects someone else to foot the bill for the market rebalancing.
In fact, the minister was speaking at an event marking the signing of a deal between Iraq and Chinese state-owned energy company Zhenhua for the development of the East Baghdad oil field, which currently produces 10,000 bpd and plans are to boost this amount. Related: Goldman: Oil Markets To Balance Sooner Than Expected
Certain optimism is in order after OPEC and Russia agreed to extend their production cut deal until the end of the year and after it became clear OPEC is already working on its exit strategy, heightening the chance of an earlier end to the deal. The shutdown of the Forties pipeline in the North Sea also played its role to keep prices high as it took off more than 400,000 bpd in daily supply from the market.
However, first of all, not everyone is as optimistic as Al Luaibi and, second, there are still headwinds.
Kuwait’s oil minister, for example, earlier this month said he expected the oil market to return to equilibrium in late 2018, adding that prices were likely to remain at their current levels throughout 2018.
Meanwhile, U.S. production continues to grow and there are no signs this trend will be reversed anytime soon.
By Irina Slav for Oilprice.com
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