- Title: USA/FILE: Conflict in Iraq drives oil prices higher
- Date: 13th June 2014
- Summary: BAIJI REFINERY, BAIJI, IRAQ (FILE - 2011) (REUTERS) VARIOUS OF BLACK SMOKE RISING FROM FLARE AT OIL REFINERY SIGN READING (Arabic and English): "MINISTRY OF OIL NORTH REFINERIES CO." OIL REFINERY VARIOUS OF WORKERS AT OIL REFINERY FLARE OIL REFINERY BAIJI REFINERY, BAIJI, IRAQ (FILE - 2009) (REUTERS) OIL REFINERY VARIOUS OF FLARE ABOVE OIL REFINERY VARIOUS OF OIL REFINERY
- Embargoed: 28th June 2014 13:00
- Keywords:
- Location: Usa
- Country: USA
- Topics: Conflict,Economy,Energy
- Reuters ID: LVA3AM16XE3FN7WUWSV1VRFLOS7B
- Story Text: U.S. crude futures rose to its highest in nearly nine months amid upheaval in Iraq that threatens to disrupt oil supply, but despite spike, oil market risks in Iraq look limited, for now.
The sudden eruption of an al Qaeda-linked militant insurgency in northern Iraq this week triggered the biggest oil price spike in almost a year, as traders feared a civil war that might also draw in oil-rich neighbors.
Yet for the moment, despite a near $5 (USD) a barrel rise in Brent crude, analysts and consultants say the immediate threat to Iraq's oil supplies - most of which is hundreds of miles to the south of the fighting - is limited. Northern exports have run at a trickle for months, and few had expected a rapid recovery.
"There is a shortfall that has to be made up," said Jeffrey Grossman, president of BRG Brokerage and a New York Mercantile Exchange (NYMEX) floor trader. "I don't think theirs is going to be significant enough to even be a major blip here, but again if you just totally went to a zero output, then suddenly it has to be made up elsewhere and there's a bit of a scramble and that causes people to be concerned. They'll pay up in a panic situation."
While it is too early to say what impact the violence will have on long-term investment in a country expected to deliver a large portion of the world's future oil supply growth, near-term risks are more contained. NYMEX's U.S. crude for July delivery rose as much as $1.15 to $107.68 per barrel, its loftiest since Sept. 19, 2013. Brent crude rallied to a nine-month high of nearly $115 a barrel on Friday (June 13), but later pared gains to trade around $113.35.
Southern Iraq is overwhelmingly Shia and loyal to the government in Baghdad of Iraqi Prime Minister Nuri al-Maliki, who will fiercely defend their neighborhoods and the key oil producing and exporting facilities, say analysts.
Despite the Sunni Islamic insurgency seeking to topple Maliki, production is set to rise to a record 2.8 million barrels per day by the end of this year, said Ayham Kamel, Middle East and North Africa director for consultancy Eurasia.
Iraq exported 3.17 million bpd of crude oil in May, Reuters data show, of which around 2.6 million bpd came from its southern oilfields. Most of the rest of the oil was exported either from the autonomous area of Iraqi Kurdistan or via trucks and other smaller routes to neighboring countries.
"There's no question that everyone is on edge, there's talk of people not wanting to go home short over the weekend, but again after it's all said and done, this really is not affecting anything with the oil as far as production and delivery," said Grossman.
Iraq's most senior Shi'ite Muslim cleric urged followers to take up arms against a lightning advance by militants from the radical Islamic State of Iraq and the Levant (ISIL), whose fighters were sweeping south toward Baghdad.
The most material focus for markets is the 300,000 bpd Baiji refinery, Iraq's largest, which was surrounded by ISIL fighters on Thursday (June 12). It was not clear what impact, if any, this was having on the flow of fuel, but a prolonged outage could force Baghdad to import more gasoline or diesel from the south. - Copyright Holder: FILE REUTERS (CAN SELL)
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