Iraq’s Falling Crude Burn Bolsters Exports

Iraqi exports have remained largely static this year, but are set to increase in the fourth quarter as seasonal crude burn falls. With increased gas supplies freeing up more crude for export, Iraq’s 2017 export target looks eminently achievable.

Iraq’s draft budget for 2017 envisions exports of 3.75mn b/d next year, 3.25mn b/d of which is slated to come from federal Iraq and 500,000 b/d from the KRG. Although federal exports have been running slightly below this rate for the past two quarters, it appears an eminently achievable target for Baghdad.

Exports of Iraqi crude in September averaged $39/B, around $8/B below the price of Brent. With front month Brent futures currently trading at around $52/B, and 2017 contracts around $2-3/B above this, this implies that Iraq’s $42/B 2017 oil price assumption is around $4/B too low. If this proves accurate and federal exports hit the budget’s 3.25mn b/d, then revenues will rise for the first time since 2012. Moreover, they will rise above 2014 levels, hitting $55bn ($4.55bn/month – see chart). (CONTINUED - 716 WORDS)