Oil Markets and Geopolitics – Continued Confusion but Market Tightness Overstated
Our view on the 2012 oil market has been that higher prices would be more justified by actual outages (Sudan, Yemen, Russia, Syria) than perceived disruptions (Iran). And so it has been, to date, abetted by product dislocations in the US.
Add to supply problems the mounting issues in Iraq. Statoil is trying to exit its West Qurna project. ExxonMobil, which has challenged the Iraqi government by adding a commitment to a Kurdistan project, has apparently chosen to quit a vital water program (required for injection in four of the top five projects). Iraq is trying to lead a separate water treatment project (intended to serve BP’s lead oilfield award), without outside assistance. Reports are that this has become a ‘disaster. Lastly, export infrastructure lags, leading to an imbalance of output and product sales. The Ministry has acknowledged that the water project delays will push production growth plans from 2015 to 2017. So far.