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Iraqi sales doubts prop up oil prices

May 31, 1999

Questions over the outlook for Iraqi oil supplies this year have put a prop under oil prices again. Oil prices rose slightly last week as traders waited on a renewal of the accord between the United Nations and Iraq allowing Baghdad to sell oil to raise funds to buy food and medicine. Dated Brent crude closed at $14.68/ bbl in London on May 25, while Brent crude for July delivery closed at $15.18/bbl. July Brent closed at $15.50/bbl May 26, regaining ground lost in the preceding week and more.

Questions over the outlook for Iraqi oil supplies this year have put a prop under oil prices again.

Oil prices rose slightly last week as traders waited on a renewal of the accord between the United Nations and Iraq allowing Baghdad to sell oil to raise funds to buy food and medicine.

Dated Brent crude closed at $14.68/ bbl in London on May 25, while Brent crude for July delivery closed at $15.18/bbl. July Brent closed at $15.50/bbl May 26, regaining ground lost in the preceding week and more.

Baghdad last week grudgingly accepted a U.N. proposal to renew the humanitarian oil sales but voiced its displeasure over how the aid would be distributed, repeating a pattern dating to when the sales began. This next 6-month sale period, which began May 25, is the sixth such phase of the humanitarian oil sales. The fifth phase raised $3.9 billion against oil sales averaging about 2 million b/d, compared with the U.N. goal of $5.3 billion.

The aid distribution plan is expected to be submitted for approval this week, and it should be noted that Iraq had delayed earlier oil-for-aid sales phases in disputes with the U.N. over aid distribution.

Meanwhile, Russia, with the support of France and China, tabled a resolution before the U.N. Security Council to suspend economic sanctions against Iraq once the weapons monitoring system has been fully reinstated.

Another draft resolution, proposed by the U.K. and the Netherlands and reportedly with the support of the U.S., proposed that general sanctions against Iraq would be kept in place but that foreign firms would be allowed to invest in a number of planned Iraqi oil field developments (OGJ, Apr. 14, 1997, p. 19).

OPEC update

The traders' nervousness over the Iraq/U.N. agreement came in the wake of revelations that Organization of Petroleum Exporting Countries members had curbed output less than they promised (OGJ, May 24, 1999, p. 44).

However, Petrologistics, Geneva, told Reuters that OPEC was set to improve its compliance with the agreed cuts.

Accordingly, OPEC's combined output, excepting Iraq, in May was expected to fall to 26.16 million b/d from 26.42 million b/d in April, Petrologistics estimated.