Even though Iraq has signed some oil export contracts, the tenuous security situation, aged infrastructure and sabotage mean pipelines are not operating at anywhere near capacity, the National Bank of Kuwait said in a report.
"Continued deterioration in the security situation in Iraq has not allowed the oil sector to return to capacity production levels as early as had been hoped," it said.
"The market has become quite pessimistic and does not expect any return to normality during this year. As a result, the crude oil market has been undersupplied and is expected to remain so at least throughout the remaining part of 2003," the report added.
Kuwaiti crude will likely sell for between $23.7 and $27.9 a barrel for the remainder of the fiscal year, generating revenues of between 59% and 89% more than the expected draft budget.
The budget is expected to be 3.555 billion dinars ($11.85 billion). Kuwait had forecast a deficit of $7.56 billion.
The NBK said it expects expenditure "about 10% below budget ... which means the budget is likely to see a surplus ranging between 304 million and 1.35 billion dinars."