Citi’s commodities team believes Iraqi oil production is set to explode in the coming years, causing prices to turn downward.
In a massive survey helmed by analyst Edward Morse, Citi’s team projects Brent crude to fall to $99 next year.
One of the main reasons: Iraq’s oil production is poised to reach heights never seen in its history — neither prior to America’s 2003 invasion nor in Iraq’s ’80s heyday.
This would be the world’s second huge energy boom, with the US being the other big story.
Importantly, the current Iraq trajectory is based on post-invasion dynamics.
For instance, a second development at the West Qurna field, which didn’t exist before the invasion, could yield up to 13 million barrels per day if fully realised.
Citi cites one field owned by China’s CNPC whose 1997 contract terms were renegotiated after the invasion and whose production target of 120-130 kbpd peak target is now six years ahead of schedule.
Another major oil field, the Majnoon, near the border with Iran, had essentially been shuttered for several decades but is now expected to yield 1.8 million barrels per day.
…non-OPEC supply, combined with NGLs and Iraq, looks to grow faster than global demand, reducing the “call on OPEC crude”. The US and Canada lead a supply growth charge, but Russia, Colombia, Kazakhstan, Mexico, and Brazil should also contribute to total non-OPEC supply growth of +0.9-m b/d in 2013.
Iraq also could grow 430-k b/d or more. If Sudan, Yemen, Syria and other disrupted non-OPEC producers come back, this could add further to non-OPEC supply. NGLs add further growth that puts pressure on OPEC to cut production.
Brent spot contracts currently trade at $109.
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