Oil prices are ascending in concert with a rising stock market and an expanding sense of non-pessimism about the global economy, yet the supply of cheap oil remains far greater than demand.   Huge amounts of $5 cost oil is being moth-balled by OPEC and there is no shortage of oil inventory above ground, much of it floating at sea.   So the fundamentals of near term oil supply and demand imply lower prices but they are being overpowered by speculators who want to own oil as an investment category.  There …

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In early February I wrote about the upside potential for Iraqi oil production.  Below is the opposite case as put forward recently by an EIS reader, Nawar Alsaadi, who has first hand insights on the issue.  I think he makes a compelling series of arguments, all of which tend to the conclusion that Iraq is unlikely to provide the world with much more than it’s current 2.2 mb/d of oil, certainly over the next few years and perhaps longer term. Future Iraqi oil production is very important to projecting …

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Recent reports highlight the enormous reserves of oil in Iraq and the potential for them to be exploited in the relatively near term, potentially impacting the onset of Peak Oil.  From an investment viewpoint, I focus on the period ending in 2015, largely discounting whatever might come thereafter.  In that time frame, Iraqi production increases are more limited and political risks are still hard to assess.  That said, one must tentatively conclude from recent events that foreign contracts are likely to be let and production is likely to increase …

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Iraqi oil production was about 2.5 mb/d before the U.S. invaded.  It dropped to about 1.4 mb/d and is now back up to just under the starting point.  Iraq’s claimed reserves of some 115 billion barrels (second only to those of Saudi Arabia) are sufficient for it to achieve their new goal of producing 6 mb/d (2.2 billion barrels per year), even if actual reserves are a good deal less than what they claim.  It’s not clear that Iraq can achieve this new production objective in 4 - 5 …

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The Oil & Gas Journal (5/5/08) published an analysis of the Iranian oil industry that begins: “The Iranian oil and gas industry approaches its 100th anniversary bloated, corrupt, and nearly bankrupt, managing four times the employees but two thirds of the oil production it had before the Islamic Revolution of 1978-79.”

The piece provides details supporting each of those allegations and it outlines the history of the industry, starting with the discovery of oil in 1908 by a predecessor company of BP.  Oil was nationalized in 1951 with a very successful …

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The Iraqi government claims that new seismic data from respected sources estimate proven reserves at 350 billion barrels, which would be the largest of any country on earth.  If that claim proves close to being accurate, and if violent above ground conditions can be controlled, Iraq’s potential to produce far greater flows than its current 2.4 mb/d is potentially significant.  Against this new claim, some analysts believe that mismanagement of Iraqi fields under Saddam Hussein have caused such “watering” - that is, contamination of the oil - that Iraq will …

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  The following report from Reuters suggests Iraqi reserves could be larger than Saudi reserves and three times as large as currently estimated.  I continue to believe that if there is any chance to mitigate the onset of Peak Oil it is the possibility that Iraq will resolve its politics and pass an oil law this year, issue deals to IOC’s next year and begin substantial increases in production by 2011.  Developing land sites can be accomplished with far greater speed than exploiting the off shore fields of …

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Iraq is looking like the world’s brightest near term hope for stemming high oil prices. It is seems to have raised production about 100 kbpd in March to about 2.4 mbpd, looks to increase it to 3 mbpd by the end of 2008 and hopes to hit 4.5 mbpd by 2013.  Here is a report from Newsweek.
Iraq boosts oil exports — and pressure to pay for rebuilding
By SINAN SALAHEDDIN

BAGHDAD

Iraq boosted its crude oil exports by 3.3 million barrels in March over the previous month, bringing in nearly $15.5 billion, …

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Saudi Arabia is considered the “swing producer” of oil because conventional wisdom presumes they have the spare capacity and the will to boost or reduce supply as global conditions require.  But some doubt KSA true capacity .

If KSA is actually constrained, Nigeria and Iraq may be the world’s real swing producers in two senses.  First, they both have the geological opportunity to increase production substantially over a period of just a few years.  Second, and more relevant in the short term, both countries face a real risk that political problems …

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A new book written by a team of experts provides a field-by-field detailed explication of the thesis that Iraqi oil reserves are substantially greater than previously thought. The proven reserves were officially put at 112 billion barrels in 2007 but the final figure could exceed 300 billion barrels. The proven reserves of the Kurdish region are expected to double within the next two years.

Iraq currently produces just over 2 mb/d, down from 2.5 mb/d prior to the U.S. invasion.  The authors believe it could boost production to 3.5 mb/d before …

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As we know, the future of Iraqi oil production will have a big impact on how tight global oil markets will be over the next five years.  About a third of the reserves are in the northern “Kurdish” part of the country centered around Kirkuk.  Saddam violently tossed the native Kurds out of Kirkuk, but now they are returning and paying cash to buy out the Arabs who occupied their old houses. 

A referendum will be held in Kirkuk later this year.  Will it be peaceful?  Kirkuk holds a very key card in …

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Here is an report by David Strahan of an interview with Robin West, the Chair of energy consulting firm PFC Energy.  In it, West offers the standard rationale for higher oil prices: the advent of peak oil.  He predicts 2015.   Just another data point.

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Increased ethnic tensions in Kirkuk come just as the Baghdad government halted oil sales to S. Korea until the S. Korean’s cancel an agreement they made to buy oil directly from the Kurdish region.   Whether or not tension over control of oil by the Kurds or by the central government can be settled amicably may be the most important issue affecting Iraqi oil exports over the next year or two.  It is one key to the global price of oil over the next couple of years. Below is a …

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Below is an excerpt from the Eurasia Group’s 2008 global political forecast.  Nigeria and Iraq could each increase oil production significantly if their internal political problems were to be peacefully resolved. It thus behooves oil investors to keep fairly close tabs on developments in both countries. 

In both cases an aggrieved minority holds the key.  In Nigeria MEND and other Delta forces are keeping many hundreds of thousands of barrels per day off the market because the Delta people are not getting their fair share of oil funds while they …

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In Davos an Iraqi official said that last year’s 400,000 barrel/day crude production increase will be followed by a similar increase in 2008.   (The arithmetic in the article that follows is not correct.)

It behooves oil investors to pay attention to Iraqi developments.  I have said that “peak oil” has not yet arrived.  The reason in large part is because both Iraq and Nigeria are capable of huge production increases if above-ground facts would permit it.  We are seeing this happen in Iraq, which is one reason that oil prices …

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