Iraq Oil Surge to Fan OPEC Rivalry That Triggered Slump
(Bloomberg) — The battle for customers among OPEC members that helped trigger oil’s collapse is about to escalate.
Iraqi crude production is climbing from a 35-year high as it adds growing Kurdish supplies to its exports, while southern oilfields remain unscathed by Islamic State militants. Finding buyers for the new output means offering more attractive terms than rivals in the Organization of Petroleum Exporting Countries, say Citigroup Inc., DNB ASA and Barclays Plc.
Oil’s biggest slump in six years gained momentum in October as a wave of discounts by Middle Eastern producers signaled OPEC members were intent on defending market share against booming shale output from the U.S. The price of Saudi crude for Asian buyers was cut to the lowest in at least 14 years last month, a move followed by Iraq, Kuwait and Iran.
“This price war is not just between Saudi Arabia and the U.S., it’s also intra-OPEC,” said Seth Kleinman, head of European energy research at Citigroup in London. “Iraq and the U.A.E and everyone else is cutting prices to defend their own market share. Iraq is ramping up production and has rising volumes to move.”
Brent crude, the international benchmark, fell 48 percent last year, the biggest drop since 2008 amid a production surplus estimated by OPEC at about 1.5 million barrels a day. The slide continued this month to the lowest since March 2009. Brent for March settlement lost 26 cents to $49.34 a barrel on the ICE Futures Europe exchange in London at 12:40 p.m. local time on Wednesday.
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