Iraq just exported most crude oil since November 2016

DUBAI (Bloomberg) -- Iraq exported oil at the fastest pace since late 2016 during the first half of July, indicating OPEC’s second-largest producer is pumping more after the group eased production limits.

Crude shipments during the first two weeks of the month were 4.05 MMbpd, the highest since November 2016, according to tanker tracking and port agent data compiled by Bloomberg. That’s 6% higher than the daily average of exports for all of June. Preliminary tanker tracking data is subject to change because shipments can be delayed and the average for a full month can be higher or lower.

The Organization of Petroleum Exporting Countries and allied producers agreed last month to ease production cuts to ensure sufficient supply to markets, starting in July. Saudi Arabia, the world’s largest exporter, and Russia said that OPEC and partners would increase output by about 1 MMbpd. They had been curtailing output since the start of 2017 to help curb a global glut. Brent crude recovered from below $30/bbl in 2016 to $80.50/bbl in May this year.

Iraq sold 3.84 MMbpd of crude on average in June and pumped 4.5 MMbpd that month, according to data compiled by Bloomberg. That would indicate domestic refinery demand of about 650,000 bpd. If Iraq maintains exports at the same level for all of July and domestic crude use remains consistent with June, the country would pump about 4.7 MMbpd in July. That would be the highest monthly production ever, according to data compiled by Bloomberg.

Iraq ‘committed’

Oil ministry spokesman Asim Jihad said Iraq was “committed” to the output limit set by OPEC when asked about the country’s production level. Iraq’s output was capped at 4.35 MMbpd under the 2016 deal. While the country has exceed that level every month but one since the start of the OPEC deal, Bloomberg data show, the group’s decision to raise output has called the country-level quotas into question because some members aren’t able to pump as much as they agreed.

Iraq’s production is probably closer to 4.8 MMbpd currently, said Jaafar Altaie, managing director of consultant Manaar Group in Abu Dhabi. “The higher oil price is paying off and allowing the Iraqis to invest more in some of the government-controlled fields.”

Higher spending is adding production at fields in the central and northern parts of the country, some of which isn’t being exported, Altaie said. The country can maintain output at about 4.8 MMbpd for the rest of the year, while even greater levels of spending will be needed to keep that pace into 2019, he said.

Iraq has raised refining capacity to 750,000 bpd as the country works to restore crude-processing units damaged by Islamic State militants, Deputy Oil Minister Fayyad Al-Nima said in an interview in Baghdad earlier this month. It’s working to resume crude processing at the 310,000-bpd Baiji plant in the north and is building a new 140,000-bpd refinery at Karbala.

Exports from the Middle Eastern country could be even higher if the central government and the administration in the semi-autonomous Kurdish region solve a dispute over oil revenue that’s blocked federal exports from using a northern pipeline to Turkey, the International Energy Agency said this month.