This report is based on one supplied by the London office of The Daily Star website of Lebanon, via the international news story supplier and agency AFP, with additional background information on the ISIL/Iraq conflict supplied by the HEM blog editor and reporter.
Despite ongoing tensions in Iraq as a new militant group sweep their way through much of the country’s north and centre, oil prices for the area continued to rise as of today, according to crude oil analysts and Lebanon’s Daily Star newspaper, it has been reported. Quoted oil prices on the international commodities market continued an upward trend this Monday holding not far from last week’s exceptional nine-month peak, analysts have noted.
In particular, outbound deliveries of Brent crude-priced oil from the beleaguered Middle Eastern nation, one of the world’s top producers, added 10 U.S. cents to the price of a barrel, which now stands at $114.91 under London prices via their late morning deals compared with Friday’s closing level. Oil pricing benchmark West Texas Intermediate of the United States reported a larger 22 cents increase on their prices for Iraqi crude and barrels there have been quoted at $107.05. Both transatlantic trends have proved unusual in that armed conflict and disarray generally cause a drop in oil prices, but this weekend’s running increases seem to have bucked that usual trend, perhaps buoyed in part by increasing demand for oil from highly industrious countries like China and Mexico.
Dorian Lucas, an analyst at British-based energy consultancy Inenco, helped explain the situation with Brent oil. In an interview, he stated ” Brent crude opened today at fractionally below $115 per barrel…Prices remain around the nine-month high average achieved in the back end of last week, supported by the continued violence and instability in Iraq “.
Last Thursday witnessed a soar in price for Brent oil $115.71 a barrel – the highest point since September 9, 2013. In the New York commodity exchange, prices jumped to $107.73 per barrel, a level not witnessed since September 19, 2013.
While oil traders in the Western markets have rejoiced, the situation on the ground for the Iraqi cabinet of Prime Minister Nouri al-Maliki has been far from pleasant. The ISIL militia, also known as ISIS, and fully referred to as the Islamic State in Iraq and the Levant & Al-Shams have cut a swathe across Iraqi territory these past few weeks. Active in neighbouring Syria, where ISIL fighters are battling the government of that country’s president Bashar al-Assad, the militia, once allied with Al-Qaeda but following their own trajectory now, have invaded and occupied several of Iraq’s major cities. The birthplace of former dictator Saddam Hussein, Tikrit, as well as the oil producing city of Mosul have been quickly taken over by ISIL while local regiments of the Iraqi army have fled after abandoning their posts, uniforms, equipment and bases. The ISIL have threatened to march and take Baghdad, Iraq‘s capital as well as the predominately Shi’a south, including the holy cities of Najaf and Karbalah.
Iraq’s security forces are struggling to contain the insurgency as ISIL have overrun five of the country’s provinces, exacting murderous revenge on those soldiers and civilians unable to flee in advance. Hundreds of thousands of refugees have been made effectively homeless and there are fears the country could slide into sectarian civil war and even break apart. Iraq is still reeling from the aftereffects of the US invasion of 2003 which saw the overthrow of Saddam Hussein’s Ba’athist government. Many people, both inside and outside the region,still claim the Americans’ main motivation for the invasion was to secure control of Iraq’s vast oil reserves.
Recently, the militants have swept into the towns of Rawa and Ana in Anbar province, west of Baghdad, after taking the Al-Qaim border crossing with Syria. They have now formed a corridor of Iraqi territory linking them up with co-fighters across the border with Syria.
The crisis has however, benefitted oil prices internationally, with barrels from OPEC’s number two producing nation still flowing largely unimpeded. However, in an industry prone to sudden falls and uncertainty, markets have now priced in potential supply disruption, traders say. David Lennox, a resource analyst associated with Fat Prophets in Sydney, told the French news agency AFP: “We see oil retaining support from the violence in Iraq, but markets have already priced in a significant risk premium in the last few weeks,…“
ISIL militants have yet to arrive in the south of Iraq, where most of the lucrative oilfields and installations are based. If they do manage to take up these fields, it is assumed that oil exports will drop significantly and that ISIL commanders may use the fields’ revenues to bankroll their occupation and ongoing struggle in both Iraq and Syria.
“We see prices remaining relatively stable at current levels as long as the crisis does not spread to Iraq’s south where most of its exports are coming from,” added Lennox.
“The market has already been quite used to patchy output from the north where the fighting is currently going on, and it must also be noted that Iraq has been extremely volatile in terms of output for many years now.”
Iraq currently is the world’s second largest crude oil exporter after Saudi Arabia. Both are members of the twelve-nation oil producing and exporting union Organization of Petroleum Exporting Countries (OPEC). Iraq is believed to possess around 11 per cent of global oil resources and generates 3.4 million barrels of ‘black gold’ a day.
Half-Eaten Mind, Twitter https://twitter.com/halfeatenmind
The Daily Star, Twitter https://twitter.com/DailyStarLeb
“Oil market climbs on Iraq tensions” – AFP via The Daily Star Lebanon, The Daily Star (23 June 2014) http://www.dailystar.com.lb/Business/Middle-East/2014/Jun-23/261217-oil-market-climbs-on-iraq-tensions.ashx#axzz35RobsNzy
CC Search, Creative Commons http://search.creativecommons.org/
“File:Iraq’s Khawr Al Amaya Oil Platform (KAAOT) just after sunrise.jpg” – Lenny M. Francioni/United States Navy via Wikipedia/Wikimedia Commons (4 October 2008 – date image taken, 5 October 2008 – date of publication) [ published under US NavyID 081006-N-8861F-001 ] http://en.wikipedia.org/wiki/File:Iraq%E2%80%99s_Khawr_Al_Amaya_Oil_Platform_(KAAOT)_just_after_sunrise.jpg