Iraq Overtakes Iran in Oil Production, IEA Data Shows

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Researched by Industrial Info Resources (Sugar Land, Texas)--Iraq's oil output rose to more than 3 million barrels per day (BBL/d), the highest output since the U.S.-led invasion, International Energy Agency (IEA) data showed. The country surpassed Iran as the second-largest producer in Organization of Petroleum Exporting Countries (OPEC) after Saudi Arabia for the first time since the late 1980s. Iranian oil output fell below 3 million BBL/d for the first time in more than two decades, dropping to 2.9 million BBL/d in July 2012.

"Iraq's oil production is now higher than that of Iran, Kuwait and the [United Arab] Emirates," said Hussein al-Shahristani, Iraq's deputy prime minister, on Sunday. Iraq has set an ambitious target of pumping 12 million BBL/d by 2017, but analysts remain cautious. "Given that optimistic views of global oil supply this decade tend to rely very heavily on sharp increases of output from Iraq, the relatively slow development of the Iraqi oil sector may not be enough to reach Baghad's production target," said Mishwin Mahesh, a commodities analyst from Barclays Capital in London.

Iranian output and exports have fallen sharply in recent months because of international sanctions targeting the country's energy and financial sectors. In the last five years, Iranian oil production fell dramatically to less than 1 million BBL/d due to sanctions from Western countries and under-investment, while Iraqi output has surged 800,000 barrels a day. The gap between two countries' oil production is likely to widen in the foreseeable future, as Baghdad continues to rebuild its oil industry with the help of foreign direct investment from oil companies.

IEA Cuts Demand Forecasts

Meanwhile, the IEA cut global oil demand forecasts for this year and next, estimating that growth will slow in 2013 amid weaker expectations for the global economy. Global demand will average 90.5 million BBL/d next year, IEA said in its monthly report. The IEA estimates that growth in world oil use will decelerate to 800,000 BBL/d, in 2013 from 900,000 BBL/d this year.

"A relatively subdued global oil demand forecast persists for both 2012 and 2013, resulting from the weak economic backdrop," the agency said in its monthly report. "Demand growth will likely fall in 2013, as the stronger macroeconomic outlook is offset by, among other reasons, the resumption of nuclear capacity in Japan, reducing prospective oil needs from the power sector."

The Brent oil price for September delivery increased to more than $115 per barrel, reaching a three-month high. The Brent-West Texas Intermediate differential reached $21.32, the most since April 2012.

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