UN Politics Prolongs Iraqi Oil Export Halt, risking 50 Million Barrel Shortfall

Strategic Insights -

The UN's imminent decision on Iraq's oil exports is poised to prolong the country's oil export halt for another week, with global oil stocks expected to dip below 1996 levels by year's end. The US and UK, despite Baghdad's rejection of a two-week extension, are likely to favor a short-term extension of phase six, which would result in a total loss to markets of at least 50 million barrels between the expiration of the current phase and the earliest possible resumption of full Iraqi exports. This move aims to ease pressure on UN diplomats to reach an agreement on a comprehensive text for allowing arms inspectors back into Iraq, while also providing a campaign advantage for the US in the presidential election and giving international respectability to US bombings over Iraq.

Key Takeaways:

  • The US and UK are likely to favor a short-term extension of phase six of the oil-for-food plan, despite Baghdad's rejection of a similar two-week extension.
  • A weeklong extension would result in a total loss to markets of at least 50 million barrels between the expiration of the current phase and the earliest possible resumption of full Iraqi exports.
  • Iraqi production has dipped to 1.4 million barrels per day at most since November 24, less than half its previous levels.
  • Exports of Kirkuk grade oil could ramp up almost immediately, while exports of Basrah Light would take 10-12 days to reach maximum output.
  • A new one-week extension would make December 12 the earliest date for the submission of new contracts, with four to six more days needed to secure UN approval.
  • The peak 1.45 million b/d export capacity achieved during phase six would not be available until just before Christmas.
  • Iraqi oil exports are a significant factor in global oil stocks, which are expected to dip below 1996 levels if the halt continues.

Statistics:

  • Iraq's oil production is expected to dip to 1.4 million barrels per day at most.
  • The total loss to markets of at least 50 million barrels between the expiration of the current phase and the earliest possible resumption of full Iraqi exports.
  • Iraqi exports will not be able to reach maximum output of 1.45 million b/d until just before Christmas.
  • The UN Security Council meeting on Iraq is expected to discuss a draft resolution on Thursday.
  • Global oil stocks are expected to dip below 1996 levels by year's end.
  • Iraq's oil exports are crucial for global oil supplies, with the country having previously reached a peak of 3.3 million barrels per day.

Sources:

  • "Iraq rejects US-led bid to extend oil-for-food plan" (not specified)
  • "US and UK favor short-term extension of Iraq oil-for-food plan" (not specified)