I agree--Iraq is one of the potential bright spots going forward. Even if they can increase their production by, say 3.5 million barrels a day, this won't last very long in meeting the world's increasing demand. I have not investigated this enough to know what a reasonable estimate of this amount might be, and over what timeframe.

I take a slightly different view of Iraq's potential impact, in the future.

On one hand, I assign a kind of chaos dynamic to future Iraq production. Which means that it's so complicated to gauge risk of US withdrawal, US presence, Iran's influence, sectarian tensions, and Israel-Iran tensions, that I throw up my hands. I'm a big believer in keeping a strong "I have no idea what will happen" in my analysis, if that's what's called for.

However, one data point on which I can rely is the fact that daily Iraqi oil production has now fully recovered to the levels we saw prior to the Iraq War. Not to the two, monthly spike-peaks we saw when clearly the government jammed production higher, in anticipation of conflict. But, in 2008 we are tracking at 2.3MB/day. So that is easily matching the 2002 average of 2.02MB/day.

So what that tells me is that the potential swing higher, from current levels, is not quite the eye-opening swing it might have been, say, from levels 1, 2, and 3 years ago, when Iraqi production slumped below 2Mb/day . As important is consideration of the long-term damage to Iraqi oil fields that took place under previous rule. I should add I have seen or received some dispute over this idea from Iraqi Petro engineers. Perhaps a middle case is appropriate here: potential for significantly increased production lies in wait, in Iraq. But the speed by which that increase would take place may very well surprise, on the downside.

I assign high risk to the advent of both an Obama or a McCain administration. Simply put, they both represent change. This will provoke anticipations, reactions, and new dynamics. I'm not optimistic. My most optimistic case for Iraq oil production is that it could be crossing above the production level of 3Mb/day in late Q3 2010--with hope for 4Mb/day in late Q3 of 2011.

G

Iraq oil production never reached 6 million, Iraq maximum production took place in 1980 at around 3.3 bpd, the talk about 6 million barrel a day goes as far as the days when I was a kid living in Baghdad in the mid-80s, in order for Iraq to reach this 6 million a day number, it require massive multi-billion dollar investment program, but the issue is not really about money, the issue with Iraq is about politics, the hydrocarbons law has stalled for years in the parliament, the Kurds will not sign on the law before the issue of Kirkuk is resolved, and by looking at the deadlock regarding Kirkuk local election of late, the Kirkuk issue seems far from over.

The best Iraq can do is sign the long talked about technical oil contracts (even thought those have also stalled), should Iraq sign those, Iraq oil production can increase by 0.5 million bpd, however it is also worth noting that any political stability in Iraq will also greatly enhance internal demand which has been artificially depressed for too long, as a matter of fact Iraqi oil exports already decreased from 1.99m bpd in May to 1.85m bpd in July, due to the current relative stability:

http://www.iraqdirectory.com/DisplayNewsAr.aspx?id=6653

regards,
Nawar