Iraq will supply 5 million barrels of extra crude to its partners in June, industry sources familiar with the issue said, following the steps of other Middle East producers by lifting market share ahead of an OPEC meeting scheduled this week.
Iraq, which is the second-largest producer in the Organization of Petroleum Exporting Countries (OPEC), had already been targeting record crude export volumes from southern terminals next month of 3.47 million barrels per day.
The state-run Iraqi Media Network has stated that Iraq has reached a total output of 4.7 million barrels per day and exporting a reported 3.9 bpd, according to an Iraqi oil official. These numbers account for northern Kurdistan, Kirkuk and all of Iraq according to the Ministry of OIl Website and the Deputy Oil Minister Fayadh al-Nema.
The additional supplies come from an expansion of the Luhais and Artawi fields in southern Iraq. Iraq wants to increase its oil output by up to a third by 2020.
Saudi Arabia, Kuwait, Iran and the United Arab Emirates, also plan to raise supplies in the third quarter.
A recovery in global oil prices from 12-year lows to above $50 a barrel and rivalry between Saudi Arabia and Iran have dampened expectations that OPEC will rein in supplies at Thursday’s meeting.
While additional exports could make up for shrinking output and supply disruptions elsewhere, the new supplies also risk delaying a re-balancing of a global market still awash with oil.
“OPEC is indeed increasing supplies, practicing their market share first strategy,” said Victor Shum, managing director of downstream energy consulting at IHS, referring to a Saudi-led drive to boost OPEC’s production to take back market share.
Iraq’s Oil Marketing Company (SOMO) allocated 5 million more barrels of Basra Light crude loading in June to upstream partners including PetroChina, Eni and Lukoil, three sources familiar with the matter said.
Foreign companies are paid in oil under technical service contracts (TSCs) signed with SOMO, although payments have been delayed after the oil price drop squeezed Iraq’s budget.
A Gulf industry source said the additional oil was given “because of the pressure from the TSC contractors”.