Iraqi oil exports 'won't hurt prices'

Iraqi oil exports, which is scheduled to start today is unlikely to affect the crude prices worldwide as reluctant traders may prefer to watch the development from a distance for some time.

The prevailing sense of insecurity at the oil installations in Iraq is expected to keep the traders away for some time.

On the other hand, the reports that the Opec will keep its June production lower than May has further boosted sentiments in future markets at the end of last week.

The global oil market is watching the first shipment of Iraqi oil with keen interest, which is scheduled to depart from the southern Turkish port of Ceyhan on Sunday. The oil would be brought in to Ceyhan port through pipeline from the northern Iraq oil fields.

The Iraqi oil production is likely to touch around 2 million bpd level by the end of the current year, however lot depends on political stability and general security in Iraq. Many among the industry analysts believe that stable supply is essential for the long-term commitments from the buyers.

The current Iraq oil production is has touched at 80,000 bpd, as stated by the Iraqi oil ministry chief Thamir Ghadhban recently.

Two major factors are expected to contribute further to reluctant reactions to Iraqi initiative on the export front.

"The insecure refinery installations and pipelines in Iraq have contributed largely to slow and reluctant response from the trading companies," said an analyst. Iraqi oil ministry has recruited some 3,000 security personal to protect its pipeline and the refineries.

However, trade is cautious and is expected to take time to react to the Iraqi offer.

"The political uncertainty in the country and increased incidents of violence in the recent past have contributed further to uncertainty", according to a market analyst.

Analysts also believes that the U.S. would extend all kinds of support to Iraq to ensure smooth running of its oil business. The US government is expected to help Iraqi oil industry finance its reconstruction efforts.

The U.S. oil companies may also be obliged to enter into long term commitment to begin with, believes some analysts.

Crude prices, which dropped consecutively for the past four sessions, finally firmed up on Friday. Oil prices on Friday ruled high after four consecutive sessions, at $ 30.82 per barrel for the July crude.

The market sentiments are expected to remain upbeat tomorrow.

The Opec production cut estimates announced by a Geneva based Petrologistics Limited, is expected to support the prices further during the next week.

According to Petrologistics, Opec June output is expected to be down by 1.84 million barrels per day from May to 25.76 million. The estimate is close to what Opec members have discussing since its last meeting to keep the production at around 26 mbpd.

The crude prices are expected to discount the impact of Iraqi export news during the next session at the beginning of next week.