International Energy Agency: Forecast of OPEC Production Growth Doubling by 2022

The International Energy Agency has predicted that the production capacity of the Organization of the Petroleum Exporting Countries (OPEC) will grow nearly double from previous forecasts by 2022. According to Bloomberg, the IEA forecasts that OPEC will increase its production capacity by 1.95 million barrels per day from 2016 to 2022. This increase is primarily due to rising production in Iran and Iraq, with about one-third of the increase attributed to Iraq. The IEA predicts that Iran will raise its daily production capacity by 400,000 barrels in 2022, reaching 4.15 million barrels, provided that the agreement to lift sanctions remains in effect. Last year, following the lifting of sanctions, Iran introduced a new model of contracts aimed at attracting foreign investment and hopes to attract $100 billion in investment in the oil sector over the next five years, 80% of which would be foreign capital. Based on the agency's report, Iraq is expected to increase its daily production by 700,000 barrels by 2022, reaching 5.4 million barrels. Last year, the agency had predicted that Iraq's oil production would reach 4.6 million barrels per day by 2021. Much of this increase will come from southern fields, such as the Majnoon oil field project, which is being developed by Royal Dutch Shell. Bloomberg reports that demand for OPEC oil is expected to be around 33 million barrels per day in 2018, which is nearly in line with the levels that existed before the production cuts. Even if Saudi Arabia, the largest OPEC producer, continues its policy of holding back some production for emergencies, the figures provided by the IEA indicate significant excess capacity next year. Regardless of whether OPEC extends its current production-limiting agreement, the prospect of returning to unlimited production, which caused prices to fall to their lowest levels in a decade, seems difficult. The agency states that considering that oil supply from non-OPEC countries is expected to surge next year, it is unclear whether there will be enough demand to absorb OPEC's excess oil immediately. Last year, the agency had predicted that OPEC's daily production capacity would increase by about 800,000 barrels between 2015 and 2021. While OPEC is working to coordinate global producers to eliminate market oversupply and reduce production ceilings, it is simultaneously preparing to meet the increasing market demand in the coming years. Iraq is developing its oil industry after years of military conflict, while Iran is seeking to attract foreign investors following the lifting of sanctions related to its nuclear program. The International Energy Agency states in this report that despite OPEC reducing production capacity in 2017, it is raising capacity in light of demand growth. According to the report, capacity growth is concentrated in the Middle East, where production costs are low, with Iraq playing a key role in this regard.