Friday, 21 December 2012
Iraq's Oil Surge Could Threaten the Saudis
Saudi Arabian Oil Minister Ali Al-Naimi needs to keep oil prices high enough to fund his country’s $600 billion social spending plans—accelerated by the Arab Spring—without incurring the wrath of consumers worldwide. Iraq, now the second-biggest supplier in OPEC, has a different priority: to rebuild its industry after decades of war.
With help from foreign oil companies, Iraq’s daily production surged 650,000 barrels this year to 3.35 million, the biggest annual gain in 14 years, according to data compiled by Bloomberg. The country plans to boost output to 3.7 million barrels a day in 2013 and at some point in the year match its 1979 record of 3.8 million. Libya, rebuilding its industry after last year’s uprising against Muammar Qaddafi, likewise plans to raise output next year, to 1.7 million barrels a day from 1.5 million now.
Brent crude recently traded as high as $110.15 a barrel, but it may sink to $88 by June if OPEC fails to curb supply.
Keeping prices reasonably high will become more challenging for the Saudis should Iran resolve its standoff with the international community over its nuclear research and start pumping oil at pre-crisis levels. Sanctions against Iran, once OPEC’s second-biggest producer, have reduced its exports by 50 percent, according to the International Energy Agency.