Months of oil industry speculation ended May 20, when Iraq and the United Nations agreed on a package of as much as $2 billion in Iraqi oil exports to pay for food and medical supplies.
Exports, which could begin in about 1 month at the earliest, likely will amount to as much as 700,000 b/d for 6 months. There is no firm schedule for resumption of exports. The accord can be renewed every 6 months at the discretion of the U.N. Security Council.
Money from the sales will be paid into an escrow account controlled by the U.N. to buy supplies needed by Iraq's people because of a U.N. trade embargo imposed after Iraq blitzed Kuwait in August 1990. Details of how the aid distribution plan will work are subject to U.N. approval.
Iraqi crude is expected to reach markets via pipelines to the Turkish port of Ceyhan and at Iraq's Mina Al-Baker terminal.
Response
Oil traders took the news of Iraq's return to world markets calmly, having discounted the prospect of added production on oil prices.
Following announcement of the Iraqi-U.N. accord, Brent crude oil for July delivery fell 40/bbl to $17.20/bbl in London trading. The price picked up during the day, though, with Brent crude for July delivery reaching $18.36/bbl by close of business May 20, up 72/bbl from the previous day's close.
Organization of Petroleum Exporting Countries Sec. Gen. Rilwanu Lukman said members will do something at their next ministerial meeting June 5 to accommodate Iraqi exports.
Traders view OPECs ability to agree on how to make room for Iraqs limited volumes as key to the performance of oil prices in the second half of the year.
Talks between Iraq and the U.N. began last February but bogged down in disputes over points that included which side should distribute aid to Iraqs people, hit by U.N. trade embargoes imposed in 1990.
The U.S. and U.K. insisted that supplies should be handed out by U.N. troops.
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