The last couple of years have been extremely volatile for oil, and despite the price jumping from the mid $40s to $60 a barrel in Q2, the value collapsed to $50 at the beginning of Q3. At one point, oil fell below $40</a>, according to the price index on Nasdaq, encouraging key Middle Eastern players to increase production to counter curbing government revenue, undermining their global competitors.
Against all odds, Iraq have sustained and exceeded production goals, keeping providers of oil and gas solutions and other firms in the industry in business for more than a decade, even through times of turmoil. OPEC’s second largest producer is currently breaking records at 4 million barrels per day (bpd), making the International Energy Agency’s (IEA) prediction of 6.1 million bpd by 2020</a> all the more possible, or so one might think.
History indicates that when the temperatures start to cool, so does Iraqi oil production. Analysis conducted by Barclays Plc demonstrate that during the winter season, output typically drops by 300,000 to 500,00 bpd due to a variety of factors, although the report is still relatively unclear about the specifics. The weather conditions tend to cause loading issues and are problematic for the country’s single-point mooring systems. Also, around the beginning of the year, strong winds sometimes lead to delays in shipments from Basrah.
To avoid the reduced output, Iraq will have to up their production by 500,000 bpd to at least reach 4.5 million bpd in 2020, although still falling way below the ministry’s target by 1.5 million bpd. But OPEC don’t seem too threatened by the cooling temperatures as they continue to pump at full throttle to maintain market share, refusing to lower their production rate as a response to the diminishing low oil price.
OPEC’s decision to do so has been speculated to have contributed (and some say exacerbated) the volatility of oil as a strategy to discourage the exploration and exploitation of US shale gas reserve,” which could possibly compete with them in the long run. Whatever the reason, it doesn’t look like Iraq will be holding back on production any time soon.
John Feliciano is an intern at a reputable financial firm in London, but on the side he freelances for a number of news media outlets. He discovered his passion for industry news when he took up a journalism class in college, so whenever he’s not busy crunching numbers, he’s finding inspiration for his next article.
Guest post provided by John Feliciano
