Oil prices could reach $80 per barrel, Iraq's Oil Ministry says

Crude continued to rally following the election of Ebrahim Raisi as Iran's new president

A view shows the Iraq's Majnoon oilfield near Basra, Iraq, March 31, 2021. Picture taken March 31, 2021.  Picture taken with a drone. REUTERS/Essam Al-Sudani
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Iraq, Opec’s second-biggest producer, expects oil prices to reach $80 a barrel as the energy market stabilises.

The country is optimistic about the rise in prices, said Oil Ministry spokesman Aseem Jihad, according to an Iraq News Agency report.

He did not provide a timetable for when he expects prices to reach $80 a barrel.

Baghdad plans to export its crude to global markets in “America, Asia, and Europe”, he said.

Oil prices have increased steadily over the past month to trade above $70 a barrel amid renewed confidence in a global economic recovery.

International benchmark Brent was up 0.33 per cent at $73.75 a barrel at 1.23pm UAE time yesterday while West Texas Intermediate, which tracks US crude grades, rose by 0.36 per cent to trade at $71.90 a barrel.

Oil also continued to rally after the election of Ebrahim Raisi as Iran’s new president.

His victory is expected to delay Iran’s ongoing nuclear talks with the US, which could in turn delay the return of Iranian oil to the market.

Iran was Opec’s fourth-largest producer before the resumption of US sanctions by the Trump administration.

“Adding to the supply-side risks, the interim nuclear deal extension with world powers is due to expire this week,” said Jeffrey Halley, a senior market analyst for the Asia-Pacific region at Oanda.

“Despite the culling of global recovery positioning evident last week across multiple asset classes, oil is underlying physical demand picture remains positive.”

Oil will continue to be supported by the rising demand for energy as economies reopen.

Iraq’s optimism about energy prices comes after the country’s oil minister, Ihsan Abdul Jabbar, gave a bullish outlook for the commodity last week.

Crude prices are expected to range between $68 and $75  a barrel if Opec and its allies continue to cut production to support the markets, Mr Jabbar said.

Last week, some traders estimated that oil could reach $100 a barrel.

“If you are cutting supply without, at the same time, addressing your demand, that is when you can get price dislocations,” said Alex Sanna, the top oil trader at Glencore.

“You are really only one or two events away from a material spike in oil prices.”

Crude prices could hit $100 after next year when the world returns to its pre-Covid demand growth trajectory but “supply and spare capacity are short, thanks to a deeper cutback in global upstream investment starting last year”, said Vandana Hari, founder and chief executive of Singapore-based Vanda Insights.

Oil prices are no longer dependent on demand outlook “but very much around the supply”, said Matt Stanley, senior broker at Dubai's Starfuels.

“The longer they keep, the higher the prices will get and the markets are certainly looking like they wanted to go that way ... and $80 is certainly on the cards.”

Higher oil prices and economic support by governments and central banks could lower fiscal breakeven prices for Middle East producers, according to the International Monetary Fund.

The fiscal breakeven price is defined as the oil price needed to balance the budgets of oil-exporting countries.

The fiscal breakeven price of Iraq has increased steadily since 2018, when it was $45.40 a barrel, the fund said.

Last year, Baghdad had a fiscal breakeven price of $63.70, which is expected to hit $71.30 this year before falling to $66.10 next year.

Opec+, which is headed by Saudi Arabia and Russia, is planning to bring 2 million barrels a day back to the markets by July.

The group left its outlook for global demand growth unchanged for the second consecutive month amid easing mobility restrictions.

Oil demand is expected to grow at 6 million bpd, with total consumption expected to hit 96.6 million bpd, according to Opec.