Iraq Strife Offers Little Upside to Depressed Tanker Markets: Analyst

The situation in Iraq has taken center stage in the oil markets. Iraq is now in a state of sectarian civil war and the most likely situation is that the country will become mired in a protracted Syria-like conflict, with the population divided along ethno-sectarian lines. But this offers little upside for currently depressed tanker markets, considers PIRA Energy Group's Weekly Oil Market Recap.

Baiji Refinery Under Siege and Has Ceased Operation
Iraq’s Baiji refinery is likely to be idle for a prolonged period, requiring Iraq to import additional refined products. Possible sources are other Middle Eastern countries, Turkey and India.

There is capability to import products at the southern port of Basrah, but deliveries by truck from neighboring countries will certainly be needed. This could prove difficult with the ISIS fighters in control of much of northern Iraq.

With Baiji operating in 2013, Iraqi product imports totaled 200 MB/D. If all of Baiji’s light product production needed to be replaced, imports would need to increase by an additional 120 MB/D, or consumption will fall.

Freight Market Outlook
The situation in Iraq has taken center stage in the oil markets. Iraq is now in a state of sectarian civil war and the most likely situation is that the country will become mired in a protracted Syria-like conflict, with the population divided along ethno-sectarian lines. But this offers little upside for currently depressed tanker markets.

Northern Iraqi exports are unlikely to return soon but the 2.6 MMB/D of current southern exports remain relatively well-protected. Previously forecast production growth from Iraq is now unlikely. This will translate into higher flat crude prices and higher bunker prices versus PIRA’s previous assessments and ultimately lower global oil demand and trade.

Source: PIRA Energy Group's latest 'Weekly Oil Market Recap'