Moves to restore oil production facilities also appear to have slowed in Iraq as fierce fighting continues in addition to a spate of kidnappings of foreign civilians.
Delays in increasing Iraqi oil output will push up the price of crude oil on international markets, which may have an adverse impact on Japanese and world economies, an industry expert said.
The Iraqi oil ministry has postponed indefinitely an international oil conference, originally slated for Sunday in Basra, southern Iraq. The conference, intended as an opportunity for the ministry to brief U.S. and European oil majors on the country's oil development plans, has been postponed because of the worsening security situation.
Hopes that Iraq could promote its oil development through investment of foreign capital appear to be gone for now.
According to the International Energy Agency, Iraq's crude oil production in March recovered to pre-war levels of about 2.4 million barrels per day.
The recovery was chiefly due to resumed operation of some pipelines transporting crude oil from northern Iraq to a port in Turkey, restarting its oil shipments to European markets.
Major Japanese trading houses, including Mitsubishi Corp. and Itochu Corp., resumed crude oil imports via a port in southern Iraq last autumn.
The oil ministry of Iraq had forecast an increase in crude oil production to 2.8 million bpd during 2004, and hoped that it could increase production toward 5 million to 6 million bpd in the future.
Due to the ever-worsening security situation, as evidenced by the recent kidnappings, expectations of increased oil production have now faded.
The prevailing view in the market now is that unless the security situation improves, oil production in Iraq will remain in the vicinity of 2.5 million bpd in the days ahead.
The Organization of Petroleum Exporting Countries has decided to cut its quota for oil production by 1 million bpd this month, and says it has no plans to increase quotas for the time being.
Should there be further delays in increasing Iraqi production, crude oil prices are likely to stay at current highs, pushing up prices of petroleum products, such as gasoline, with serious implications for corporate earnings and global economic growth.
