Actually, Iraq is the oil market's biggest problem

Iraq oil gushREUTERS/Essam Al-SudaniIraqi workers stand near a pipeline as it ejects oil at Al Tuba oil field in Basra, southeast of Baghdad February 19, 2015.

There’s a bigger threat to oil prices than Iran.

Iraq.

Last week, Iran struck a nuclear deal with several world powers that, among other things, will end an oil embargo and allow the country to increase production for export.

Analysts have begun to worry that the extra supply — estimated at up to 400,000 barrels per day by Goldman Sachs — could worsen the already flooded market.

In a note to clients on Friday, however, JP Morgan analysts found that Iraq is a bigger, more immediate concern to the market

The firm wrote (emphasis added):

Iran’s agreement with the P5+1 solidifies the case of increased production in Q1. However, it is arguably additional supplies from Iraq that are pressuring world oil prices more than Iran at this juncture. Iraqi production has risen consistently over recent quarters, but surged ahead in 2Q2015 prompting us to conclude that Iraq will likely overtake Saudi Arabia as the biggest contributor to OPEC growth this year.

The full potential of Iranian oil exports is not expected within the next year, because the production infrastructure still needs to be brought back to life.

And so Iraq’s surging production is a more immediate threat to oil prices, which fell for a third week in a row last week.

On Monday morning, West Texas Intermediate crude futures were slightly lower, and fell to around $US51 per barrel.

Writing to clients on Friday, Deutsche Bank’s Michael Hsueh noted that Iraqi output surged to a record high of 4.1 million barrels per day in June.

“In comparison to other OPEC members, this means that Iraqi excess production at 920 kb/d above its inferred Oran Agreement quotas is second only to Saudi Arabia at 1,670 kb/d above quota,” Hsueh wrote.

Here’s JPMorgan’s forecast of Iraqi oil production:

And via Deutsche Bank, this chart compares how much OPEC members have pumped above their inferred quotas, with Iraq’s output surging in June, second only to Saudi Arabia:

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