In the north and east of Iraq, Sunni-led militants are tightening their grip on towns and arising concerns that their advance south could put the output of the region’s second-biggest oil producer at risk.
According to reports the biggest weekly gain this year of Brent crude was when it hit dollars 114.69 on Friday i.e. its highest level since last September. Dollars 30 to the price could be added because of loss of Iraqi supply, says reports.
Airlines which were already hurt by a profit warning from Germany’s Lufthansa are further pressurized by hiking oil prices.
Far from the Islamist rebel fighters, most of Iraq’s oil exports come from south of Baghdad but their advance has increased fears over output. America has threatened military action against the militants, including possible air strikes.
Ole Hansen, head of commodity strategy at Saxo Bank said, “Iraq has been one of the positive stories in terms of increased production”.
He further added,” the fighting will make it close to impossible to develop untapped resources in the northern and eastern parts of the country. The key question is whether Baghdad, Karbala and the Shi’ite-controlled oilfields and export facilities in the south can remain calm and avoid becoming embroiled in the conflict.”
The crisis would not disrupt Iraq’s output in its monthly oil market report according to the International Energy Agency last week.
According to a Paris-based agency, “Concerning as the latest events in Iraq may be, they might not for now, if the conflict does not spread further, put additional Iraqi oil supplies immediately at risk.”
It further said “roughly 60 per cent of the growth in OPEC crude production capacity for the rest of this decade will come from Iraq. The output from the south had been rising and production had hit a 30-year high. However, the agency underlined Iraq’s long-term importance for the global energy market”.
