Iraq’s rapidly expanding oil production is likely to complicate OPEC’s efforts to influence world prices as the country re-emerges as a major player after 20 years on the sidelines because of sanctions and strife.
For now, Iraq is backing Iran’s push for OPEC to set lower production limits and keep prices high, but Baghdad’s ambitious plans for expansion could cause an overall production growth that might drive down prices.
Analysts say Iraq’s clout is shifting the balance in the 12-member Organization of the Petroleum Exporting Countries and could force it to overhaul its intricate production quota system to accommodate Baghdad’s greater output.
Iraq recently reached production of 3 million barrels a day, a level not seen since the 2003 U.S.-led invasion that ousted dictator Saddam Hussein. It is on track to become OPEC’s second-largest producer in the coming year, surpassing Iran and trailing only Saudi Arabia.
“Iraq, for all intents and purposes, could double its production in next five years, could go from 3 million barrels a day to 6 million barrels a day,” said energy analyst Fadel Gheit, managing director of consultancy Oppenheimer & Co. in New York. “No other OPEC country has the ability and capacity to do that.”
Oil prices are determined by many factors, but chief among them is supply and demand.
For decades, OPEC has tried to control oil prices by limiting production.
Additional production from Iraq, unless offset by reductions from other cartel members, could drive oil prices down.
