Although investors have become accustomed to a bear market in oil, they are still preparing to take extra precautions as Iraq intends to increase its crude supply by about 26 percents to new highs of 3.75 million barrels a day next month according to predictions by Bloomberg, citing shipping programmes.
After Saudi Arabia, Iraq is one of the top Organization of the Petroleum Exporting Countries (OPEC) producers, producing approximately 800,000 barrels of oil a day.
If Iraq confirms additional oil supplies, OPEC’s collective output target of 30 million barrels day will be thrown off track, says Morgan Stanley.
Volatility in oil prices, partially caused from a surge in US supplies due to shale oil production, have become a great hurdle for OPEC. Thus, OPEC has agreed to keep production at 30 million barrels per day in November, keeping oil prices lower than many oil-exporting countries would like.
OPEC will meet once again on June 5 at their ministers’ ordinary meeting. However, a change in oil production is not expected.
Recently, the Iraqi government has been struggling to limit ISIS' control over oil fields, seeking the help of the Shiite popular mobilisation group and the Kurdish regional government. A "temporary deal" has been struck between the Iraqi government and the Kurdish regional government allowing the Kurdish side to sell crude independently.
July Brent crude rose by 64 cents to $64.36 a barrel on Wednesday morning, while US crude gained 68 cents at $58.71 a barrel.