Iraq to Increase Petroleum Output Next Year?

Jabar al-Luaibi, the Iraqi oil minister urged natural gas and petroleum producers operating in the country to continue to increase exports during the next year. This of course flies in the face of the potential production cut that has been suggested by OPEC starting in November. In a market it’s been oversupplied, this can only be thought of as a bearish turn of events, as the Iraqi government will certainly face a lot of challenges going forward. Simply put, Iraq finds itself as scenario where it needs to bring in fresh capital.

OPEC production stands at about 33.6 million barrels per day currently, with Iraq making 4.43 million barrels of that. Because of this, we have to question whether or not the Iraqis will overtake any production cut. The initial agreement, slated to be 750,000 barrels a day, doesn’t take care of the oversupply issue anyway. Currently, the world is oversupplied by roughly 2 million barrels a day when it comes to crude oil. Any additional output that Iraq does can only hurt the supply and demand structure of the markets.

The minister “has affirmed the need to proceed forthwith increasing oil and gas production through enhancing the national effort and those of the license companies for the remainder of 2016 and also for 2017,” a statement by Jabar al-Luaibi said. Because of this, one would have to think that but oversupply of crude oil is going to be even more exaggerated in the future. One will have to wait to see what the market reaction to this announcement is going to be, but we cannot think that it would be positive. Recently, petroleum markets have skyrocketed due to the suggested OPEC agreement, and that has left both the WTI Crude Oil and the Brent markets in a bit of an overextended state at this point in time. A pullback would have been expected anyway, and with more bearish fundamental news coming out of Iraq, it’s hard to believe that the sellers won’t be interested in the market as it may have overshot itself again.