Iraq’s fragile security situation may limit its plans to expand oil-production/Bloombergby Bloomberg
The International Energy Agency (IEA) has warned that oil supplies from Iraq, the Middle East’s second-biggest producer, are potentially vulnerable amid intensifying geopolitical risks in the country and the broader region.
Crude prices briefly soared to a three-month high above $70 a barrel last week as tensions between the US and Iran erupted in neighbouring Iraq, where America assassinated an Iranian general and Tehran struck US military bases in response. IEA stated that though hostilities have decreased, the threat of escalation still menaces Iraq, which was already grappling with domestic protests that spread to its oil-rich southern region.
In a report, Paris-based IEA said that Iraq’s oil exports have doubled during the last decade to reach four million barrels a day, with half these volumes flowing to China and India, the two major centres of global demand growth.
However, the clash between the US and Iran has not yet caused any supply disruption and protests inside Iraq have had only minimal impact on oil operations. Global oil markets have a ‘solid base’ of ample inventories and swelling US shale-oil output to weather any shocks, added IEA.
Iraq’s fragile security situation may limit its plans to expand oil-production capacity in the medium-term, making it difficult for the global industry to meet rising demand in the second half of the decade.
Baghdad is committed to reduce output in the coming months as part of its agreement with fellow Organisation of Petroleum Exporting Countries (OPEC) nations to keep world markets in balance. Iraq pumped 4.59 million barrels a day in December 2019 and will need to reduce by 130,000 barrels a day to comply with the accord.
Similarly, Saudi Arabia, the biggest member of the, already delivered all of the additional curbs promised before they formally took effect, pumping 9.68 million barrels a day in December 2019.
IEA said that even if OPEC and its allies fully implement the deeper cutbacks announced last month, world markets will still face a surplus of about 800,000 barrels a day in the first half of the year.