Iraq: Oil concerns in view of Iraq rebellion
07/01/2014 | 11:47 am
Oil has become one of the most important assets of the contemporary economic era; its multifunctionality and varied uses made of it a necessary evil that today the world need to uphold in order to guarantee regular macroeconomic growth and keep businesses working in line with global demands. Notwithstanding, recent events as Ukraine disruptions that resulted in the annexation of Crimea to Russia, which is a main player of the energy sector and, on the other side, the current assaults of Iraq militants to Kurdish oil refinery, are the proof that the world isnít able to correctly manage the black gold and the harm of its absence as a domino effect.
Iraq, a country with a total area of 437,072 km2, has 2.275◊1010 m3 of proved oil reserves and constitutes the fifth planet leader behind Venezuela, Saudi Arabia, Canada and Iran in the oil drilling and selling market, but the cheaper one in terms of exploitation costs and in consequence sale prices. As global economy raises its demand of this precious asset, Iraqís productive plants are expected to increase exploration activities to 5 million barrels per day in 2014.
Regarding gas production the country shares common pipelines of a total length of 5,600km with Syria and Iran, both lands highly vulnerable to riots and protests due to their differences and escalating controversies among governments. Subject to political stability of border countries, the problem is far to be solved, thus setbacks could arise anytime, leaving world production susceptible to suffer dramatic losses, reason for what oil prices volatility and speculation are more likely to climb than to decrease.
Major oil producer players:
For its part, the spot price of WTI augmented 6.7% since the beginning of the year losing part of its momentum during the last two week but holding the bullish run in prices. Today price is $105.39 a barrel on the New York Mercantile Exchange. The London Brent in its turn couldnít face better the consequences of Iraqi rebellion as prices rose 2.79% in a single day for later reaching the $115 level. Before the start of the Iraqi uprising movements, light crude oil prices were at $108.79, which means an increase of 4% in less than a month to current prices at $113.3.
Aware of all risks and disruptions taking place in countries that are main players on the oil industry, the American government increased by 3.3 million barrels per days its total production since 2008. The purpose of this measure is to meet foremost local demand and fulfill missing exploration activities to run facilities and production lines. In fact, Americaís dependence on foreign oil declined from almost 11 millions of barrels per day in 2005 to less than 8 millions of barrels per day in 2013. However, the U.S. administration isnít about to open its gates to the whole world and for now only gasoline and diesel supply have been allowed but restricted to small amounts.
Main current oil fields in Iraq
KBPD: Thousand Barrels Per Day
SOMO: State Oil Marketing Organization
If Kurdistan, a self-governing region of northern Iraq were a country as rebels pretend to, the nation would rank 10th among the largest oil reserves in the world. According to estimates, one million barrels could be obtained from its oil fields by 2015 and two million barrels by end 2019. Its exploration capacity lured companies such as ExxonMobil, Total, Chevron and Gazprom that later signed agreements with the Iraqi administration, but this is far from being a good decision as the central government firmly opposes Kurdish oil sales.
Iraq resources are vital for the proper progress of global economic trades and supply in all business sectors. With four of the top worldwide giants (Exxon Mobile, Royal Dutch Shell, Chevron and BP) trading oil and energy related products fully dependent on those fields, the world isnít prepared to cover the lack that scarcity would imply. Russian and Chinese productions could give a hand for a small period of time, though further improvements will be required to make of them petroleum products eligible for export and build up strategic agreements in order to fully substitute the key role of those reservoirs.
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