(Updates Iraq fighting in fourth paragraph, oil prices in seventh. Click EXTRA for more on Middle East unrest.)
June 18 (Bloomberg) -- Crude oil exports from Iraq’s southern terminals in the Persian Gulf are poised to accelerate even as fighting plunges the country’s north into chaos and Islamist militias encroach on towns near Baghdad.
Exports of Basrah Light crude, the country’s main grade, may reach about 2.8 million barrels a day next month, according to a preliminary loading plan obtained by Bloomberg News on June 16. That’s 11 percent more than this year’s average and would come close to matching a three-decade high reached in February. OPEC’s second-largest producer shipped 5.43 million barrels from Basrah on June 11, Iraqi Oil Minister Abdul Kareem al-Luaibi said in Vienna the following day.
“The only infrastructure that is currently producing and supplying international markets is in the south and will remain untouched,” Kyle Stelma, managing director of Dubai-based Dunia Frontier Consultants, which researches Iraq for clients, said by phone yesterday. “They are systematically increasing production and export capacity, so, on average, we should keep seeing new monthly records being set.”
Fighters from the Islamic State in Iraq and the Levant battled government forces for control of the Baiji refinery in northern Iraq today, a day after clashes in Baquba, 55 kilometers (34 miles) northeast of the capital. The U.S. is conducting aerial drone operations over Iraq at the government’s request, Treasury Secretary Jacob J. Lew said in Jerusalem. Southern Iraq, where about three quarters of the nation’s oil is produced, was “calm,” Thamir Ghadhban, an adviser to Iraq’s prime minister, said in London yesterday.
“We’re seeing growth because the Iraqis have invested in export capacity and new spending has been put into fields to add production,” David Wech, managing director of researcher JBC Energy GmbH in Vienna, said by phone yesterday. “I won’t be surprised if they ship 2.8 million barrels a day. We need to see if they can maintain it and keep the infrastructure working.”
Rising exports in the south, helped by the start of a third tanker-loading point this month, contrast with the situation for Kirkuk crude. This light grade from the northern field of the same name hasn’t been exported since March, when sabotage damaged a pipeline to the Turkish port of Ceyhan. Repair work ceased this month when fighting started.
Brent crude rose as much as 0.4 percent today on the ICE Futures Europe exchange after closing yesterday at $113.45 a barrel, the highest in more than nine months. U.S. benchmark grade West Texas Intermediate gained as much as 0.6 percent to $106.97 on the New York Mercantile Exchange.
While the south is safe from attack for now, strife will hurt Iraq’s investment climate and slow the pace of oil production and export growth, HSBC Holdings Plc analysts Peter Hitchens and Gordon Gray said in a note. Iraq has played a key role in the Organization of Petroleum Exporting Countries, with its production gains helping to offset losses in supply from Libya, they said.
Iraq is targeting production of 8.4 million barrels a day after 2018, al-Luaibi, the oil minister, said June 9 in Vienna. Most analysts expect capacity to reach only about 6 million barrels a day this decade, HSBC’s Gray and Hitchens and Dunia’s Stelma said.
Capacity will increase by 1.28 million barrels a day in the six years through 2019, the most of any nation in OPEC, the International Energy Agency said yesterday. Output surged to 3.4 million barrels a day in February, the highest level since 2000, and was 3.3 million last month, according to data compiled by Bloomberg.
“The building of infrastructure to export crude oil is facilitating export growth this year and potentially into next,” Citigroup Inc. analysts led by Ed Morse wrote in a June 13 report. Still, the fighting “points to a systemic and seismic shift geopolitically” in Iraq and makes the growth harder sustain, according to Citigroup.
--With assistance from Nayla Razzouk in Dubai and Sherry Su and Grant Smith in London.