Unrest in Iraq has prompted the US Energy Information Administration’s (EIA) July Short Term Energy Outlook (STEO) to reduce Iraqi oil production growth.
Escalating violence in the region has caused the price of North Sea Brent to rise to a nine-month high of US$ 115/bbl on 19 June. Prices have fallen to US$ 107/bbl as of 9 July, as continued Iraqi crude oil exports have lessened market concerns about an imminent supply disruption.
Despite this, the EIA suggests that the escalation of violence in northern Iraq that started in June has introduced significant uncertainty into the Iraqi oil production outlook. EIA forecasts that Iraqi crude production will average approximately 3.1 – 3.2 million bpd throughout the forecast period for the STEO, which runs through 2015.
Compared to the June STEO, EIA has lowered Iraqi production growth in both 2014and 2015 to take into account recent events, lowering total production by 0.6 million bpd by December 2015. In the updated forecast, monthly Iraqi crude production is not expected to exceed its recent level of 3.3 million bpd through the end of 2015.
According to the EIA, the recent unrest has mainly affected the 0.2 million bpd of northern Iraqi crude production that supplied the Baiji refinery, Iraq’s largest. The Baiji refinery ceased operations in June because of fighting at the complex. Crude oil production in southern Iraq of 2.8 million bpd and in the Iraqi Kurdistan region of 0.2 million bpd has not been disrupted.
Approximately 90% of Iraq’s oil production is concentrated in the southern portion of the country and almost all Iraqi exports leave from the southern port of Basra, which is far from current fighting. Following the March bombing of the Kirkuk pipeline between northern Iraq and Turkey, exports from northern Iraq fell as exports from the Kirkuk pipeline halted.
More recently, the EIA states, northern Iraqi exports have started to return. In June, Kurdish Regional Government exports of Iraqi crude to Turkey averaged approximately 140 000 bpd, moving by truck (50 000 bpd) and a pipeline (90 000 bpd) that came online in late May.
Adapted from a press release by Emma McAleavey.
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