Oil market balanced on a knife's edge in absence of Iraqi crude
The recent sabotage of Iraq's oil pipelines has raised fresh concerns about production capacity and room for maneuver in case of a crisis amid firm global oil demand.
A wave of attacks in Iraq this week paralysed the country's exports from its southern sea terminals.
The southern oil fields had produced 1.6-1.8 million barrels per day before the spate of sabotage around Basra, 500 kilometres (300 miles) south of Baghdad.
Repairs to the pipelines are expected to take five days.
But meanwhile the oil market has suddenly found itself deprived of a substantial amount of crude.
And with global oil demand on the rise due to strong economic growth in industrialised countries and China every little bit of oil counts.
The International Energy Agency currently calculates global daily oil demand reached about 79.7 million barrels per day in the second quarter.
The Paris-based organisation expects demand to rise to 80.6 million bpd in the third quarter and 82.6 million bpd by the end of the year.
But as demand mounts, the crude producing members of the Organisation of Petroleum Exporting Countries have less and less extra supply to make up for any loss of Iraqi output.
Commerzbank analyst David Thomas said it was becoming increasingly difficult to find a country with spare production capacity to make up for Iraq's output.
All producers are already pumping close to full capacity in order to calm soaring oil prices.
OPEC said Wednesday that it would contact non-member producers about increasing output. But Russia and Norway, the two biggest oil exporters after Saudi Arabia, already said they coud not pump any more. Angola, Mexico and Oman are also already at full capacity, according to analysts.
As for OPEC heavyweight Saudi Arabia, which is considered to be the only producer with significant capacity still available, it has already promised to pump more under an OPEC agreement to raise the cartel's production ceiling by two million bpd as of July 1, followed by another 500,000 bpd a month later to a total of 26 million bpd.
Asharq Al-Awsat newspaper reported Wednesday that the kingdom has a large-scale project to develop two oilfields to boost output capacity by 800,000 barrels per day, bringing the country's total oil production to more than 11 million bpd.
But even Saudi Arabia -- long considered as central banker of the oil market, increasing liquidity when needed -- no longer enjoys the industry's total confidence in its spare capacity, according to the director of the Arab Petroleum Research Center, Nicolas Sarkis.
Doubts have arisen about the country's ability to increase production as much as it claims it will and maintain output at those levels, Sarkis said Wednesday at a press conference here.
"Saudi Arabia is no longer considered -- and rightly so -- as the country that can do everything," he said.
"We're a bit on a knife's edge."
Recent terror attacks in the desert kingdom have only reinforced uncertainties over the country's capacity to provide ever more supply to a hungry market.
Societe Generale analyst Frederic Lasserre said that Saudi Arabia's recent promise to increase production had helped limit the impact of Iraqi pipeline sabotage on the oil market. But the fact that its production will soon be close to spare capacity is a "real worry", he said.
"OPEC is credible as long as there are no big problems elsewhere, but it's sure that the day we need to jack up production, they're not going to be able to do it," he warned.