AMMAN, Jordan -- Amid today's tight crude markets, hundreds of thousands of extra barrels of oil have helped ease the strain. They are coming from a surprising source: Iraq.
In recent months, Iraqi oil output has climbed slowly back to levels seen before the 2003 U.S.-led invasion, thanks in large part to increased production from the north. While it is unclear whether the gains can be maintained, the higher numbers have been an encouraging sign to U.S. and Iraqi officials in Baghdad.
The added barrels come at a time of oil-market uncertainty. Supply concerns continue to worry consuming nations. Oil markets surged toward $100 a barrel last month and remain volatile. In New York commodities markets yesterday, oil jumped $4.37, or 4.9%, to finish at $94.39 a barrel, on moves by the Federal Reserve and a report on U.S. inventories.
After averaging about 2.4 million barrels a day last month, Iraqi output is now some 2.5 million barrels a day, according to data from the country's state oil-marketing agency. That is up from its 2007 trough of 1.74 million barrels a day in January. Average oil exports in November came in just shy of two million barrels a day, a postinvasion record.
The International Energy Agency, which tracks oil supplies on behalf of industrialized nations and shows a roughly similar increase from Iraq, has credited extra Iraqi production with easing some global worries about supplies this winter.
Increasing oil revenue could help the Iraqi central government capitalize on recent security gains by providing more cash to spend on restoring basic services. But Iraq has shown signs of recovery before only to see those gains wither away amid bouts of sabotage and maintenance woes, which have long plagued the country's vast but creaking petroleum industry.
Iraqi and U.S. officials and outside analysts say the real question is whether the gains are here to stay.
"Sustaining current oil production is a challenge," said Issam al-Chalabi, a former Iraqi oil minister and now an Amman-based oil analyst.
Iraq's current production equates to some 3% of daily global demand, ranking the country as one of the world's biggest producers. Production ground to a halt during the 2003 invasion. That stoppage, and the uneven return of the industry during the following four years, has been one of the biggest disruptions to global oil supplies since World War II.
Iraq's northern fields, which have fluctuated wildly, now are pumping 500,000 barrels a day. For much of that, oil officials credit beefed-up security along an oil-export pipeline that carries crude from Iraq's northern fields to Turkey and on to the Mediterranean. Since September, engineers have managed to move about 300,000 barrels a day of northern production through the pipeline. Sabotage attacks, looting of equipment and poor maintenance had rendered the northern route mostly inoperable since the invasion in March 2003.
Relatively steady production from southern Iraq also is an encouraging sign. Those fields have long been the country's petroleum mainstay. Despite security concerns and disrepair, the state-controlled South Oil Co. has kept production relatively steady at some two million barrels a day.
Iraqi and U.S. engineers have struggled with a lack of security and poor oil-field and infrastructure maintenance after years of underinvestment. Conditions worsened in the immediate aftermath of the invasion amid wide-scale looting. Smuggling and corruption riddle the industry, U.S. and Iraqi officials said.
Iraqi oil officials haven't been able to invest much money earmarked for repairs and maintenance. The government spent only 30% of the oil ministry's 2007 capital investment budget of $2.4 billion. Baghdad has allocated an additional $2 billion for oil-sector capital investment in 2008, a number most analysts agree is far short of the industry's needs.
Petroleum legislation aimed at providing a legal framework for foreign investment in the industry has stalled. Baghdad and Kurdish officials, meanwhile, are squabbling over a handful of relatively small deals the semiautonomous Kurdish enclave in the north has signed with companies.