Middle East Focus: The Coming Shift in OPEC Balance of Power?.................

Arabia Deserta

The Coming Shift in OPEC Balance of Power?.................

“When the world's top oil-producing countries sat down today in Vienna, there was a new 800-pound gorilla joining them in the room. It's not a rising oil price, which now hovers at $80 per barrel; nor is it the U.S. Federal Reserve meetings, where governors will likely leave interest rates near flat. No, the 800-pound gorilla is far closer to home for most members of OPEC: It's Iraq. If Baghdad's own projections are to be believed, Iraq could match Saudi Arabia's daily crude output of 10 million to 12 million barrels within the next seven years, up from just 2.5 million barrels today. That means price stability, OPEC's sine qua non, could go from being Saudi Arabia's solo prerogative to a shared franchise of two states: one an entrenched monarchy, the other an unruly democracy with an uncertain future. And since Iraq held a successful tender for new oil exploration work in December, the country's oil minister, Hussain al-Shahristani, has made it clear that Baghdad will ramp up production regardless of any restraints agreed upon by the world's oil cartel……… "The Iraqis are saying, 'Look, we're not going to be on par with Iran; we have to be equal with Saudi Arabia,'" says Raad Alkadiri, an Iraq expert at PFC Energy, a Washington-based consulting firm. "They note how OPEC has benefited from the fact that Iraq has not produced to its potential, and given its reconstruction demands, its need of revenue must be acknowledged."……….”

I wrote here some weeks ago about the future of Iraqi petroleum output. Iraq produces about 2.5 million bpd, but it has reserves that are close to those of Saudi Arabia. They also have years of low production (1990-2010) to make up for. OPEC will probably be completely changed with a new Iraqi production potential. This leaves that other elephant or gorilla in the room: Iran, whose oil fields have been relatively neglected from years of war and Western boycott. Within the next ten years almost certain increases in OPEC production (only partly offset by decline in other countries) and energy saving technology should alter the demand for crude. Then there is the potential for explosive demand from Asia. The demand and supply curves will shift in interesting ways.
Cheers
mhg

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