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Page added on June 12, 2014
Oil prices at nine-month highs amid Iraq violence
* Brent spikes over $113 on Iraq supply worries; US over $106
* Iraqi Kurds seize control of northern oil city Kirkuk
* Insurgents surround Iraq’s largest refinery in Baiji (Updates prices at settlement)
Oil prices jumped to nine-month highs on Thursday, as concerns mounted that escalating violence in Iraq could disrupt oil supplies from the second-largest OPEC producer.
Sunni Islamist militants, who took over Iraq’s second-biggest city Mosul earlier this week, extended their advance south toward Baghdad and surrounded the country’s largest refinery in the northern town of Baiji on Thursday.
“The fear is that will cause a threat to Iraqi oil exports,” Christopher Bellew, a trader at Jefferies Bache, said. “If this conflict knocked out Iraq as an exporter, that would have significant impact on prices.”
Brent futures gained $3.07 to settle at $113.02 a barrel, the highest level since Sept. 9. U.S. oil gained $2.13 to settle at $106.53 a barrel, also the highest close since Sept. 18, according to Reuters data.
Gains in U.S. crude were partly capped by high domestic production and lower reliance on imports from Iraq, analysts said. In 2013, the United States imported 341,000 bpd from Iraq, which represents less than 4 percent of the country’s total crude oil imports, according to U.S. government data.
The spread CL-LCO1=R between the two benchmarks widened to close at $6.49 after narrowing over the last two weeks.
After an initially muted response, the oil markets gave way to growing alarm, as the Sunni rebels appeared to make rapid advances toward the Shi’ite-led government in Baghdad, threatening the country’s future as a unified state.
Concern that the Baghdad-controlled Iraqi army was disintegrating and could no longer secure key oil facilities was exacerbated when soldiers fled the northern oil city of Kirkuk, leaving it in the hands of Kurdish forces.
Sunni insurgents overran Tikrit, threatening the 300,000-barrel per day Baiji refinery that supplies Baghdad. A witness who lives nearby said the refinery was surrounded by militants, but White House spokesman Jay Carney said it remained in control of the Iraqi government.
Despite concerns over supply disruptions, the bulk of Iraq’s oil production and export facilities are in largely Shi’ite areas in the south of the country, where al Qaeda-inspired groups enjoy little sympathy. Those facilities, which ship about 2.6 million bpd, were “very, very safe”, the country’s Oil Minister Abdul Kareem Luaibi said on Wednesday.
“The big fear is if they get south of Baghdad,” said Gareth Lewis-Davies, a strategist at BNP Paribas. “But there is no immediate indication that this will happen.”
The spike in oil prices had pushed up U.S. gasoline and heating oil futures which is likely to impact domestic physical fuel market as it is are priced against the futures.
RBOB gasoline futures were 2.76 percent or over 8 cents higher at $3.0834 a gallon while heating oil, against which diesel and jet fuel are priced, were up 3.10 percent, or 9 cents higher at $2.9944 a gallon.
13 Comments on "Oil prices at nine-month highs amid Iraq violence"
Perk Earl on Thu, 12th Jun 2014 6:46 pm
Ah, that’s a shame!
rollin on Thu, 12th Jun 2014 7:11 pm
Is this talking about that country where we spent a huge amount of money, lives and time to straighten things out?
Aren’t the Chinese getting a good portion of that oil? Let them worry about it.
shortonoil on Thu, 12th Jun 2014 7:40 pm
Crude priced at $106 is still $10 below its 48 year mean. Like stated previously here, prices would remain low until a geopolitical event forced them higher. The new higher price would then become the new bottom base price. This will give pressured producers facing increasing production costs a little more spread for reinvestment, and slow the decline in conventional production. Conventional is the only production that counts. The rest are like the marble dust put in Miki Dee shakes. It fills you up, but doesn’t provide any energy.
http://www.thehillsgroup.org/
Davy, Hermann, MO on Thu, 12th Jun 2014 9:01 pm
Interesting turn of events. I mentioned this yesterday when I was wondering how long before Iran enters the fray.
IRAN HAS SENT 150 elite fighters and has offered as many as 10,000 soldiers to its historic nemesis Iraq in the wake of a Sunni insurgency that has claimed two key northern cities
Perk Earl on Fri, 13th Jun 2014 12:24 am
In kind of a sick way, it’s getting to be fun to watch the overall global economic system in it’s attempts to mitigate diminishing returns, with each event occurring (like this latest sectarian violence in Iraq) adding just a tad more pressure, I feel like Willy Wonka as he enjoys the anticipation of pressure building up below Augustus stuck in the milk chocolate tube.
Luke on Fri, 13th Jun 2014 2:37 am
George (Willy) Bush declared on 1 May 2003 on the USS Abraham Lincoln in the Gulf:
“In the battle of Iraq, the United States and our allies have prevailed,” the commander in chief declared. “Because of you, our nation is more secure. Because of you, the tyrant has fallen and Iraq is free.”
After more than 10 years we learn the big lesson of anglosaxon tyranny and arrogancy. And its gradual decline.
meld on Fri, 13th Jun 2014 4:17 am
@Perk Earl – I was wondering what that feeling was I had. You’ve summed it up perfectly. I do feel like Gene wilder watching Augustus gloop shooting up the tube etc.
Sort of a mixture of smug “I told you so” with a touch of sinister humour and some fear thrown in for good measure. Good times
rockman on Fri, 13th Jun 2014 7:55 am
Earl – Makes me wonder how Americans viewed the increased pressures in Europe in the 1930’s as the Germans expanded their foothold just as the new boys on the block are doing in Iraq now. Many Americans felt it was a European problem that the US should get involved in.
Now many if most in the US don’t want us reinserting ourselves into Iraq. If matters get much worse in Iraq than most anticipate and gasoline goes well above $6/gallon we’ll see if that attitude changes much.
Davey on Fri, 13th Jun 2014 8:40 am
Rock, $6/gal, do we has any bets on how long they will stay elevated in that range before the financial system tanks?
bobinget on Fri, 13th Jun 2014 9:33 am
Not to worry. Iraqi pragmatists are not going to destroy oil infrastructure. While no new progress was made sustaining oil production during the Iran/Iraq or
“coalition of the willing”/Iraq wars, oil fields stayed mostly intact. Pipelines, even to this day, are blown
on a regular basis but not the means of production.
I know, I know, Saddam threatened to blow every oil well but somehow, that never happened.
Oil prices will continue to move higher because
finding and lifting expenses are higher today than any other time.
Simple like borscht.
rockman on Fri, 13th Jun 2014 9:51 am
Bob – But there’s the simplicity of the situation IMHO: a couple of pounds of C4 on a pipeline and you can effectively shut in many dozens if not hundreds of wells. And it wouldn’t take very long to repair the damage…by either side. So yes: long term the infrastructure would probably remain intact. But if the insurgents wanted to continually suppress production I can see that happening unless there is a major influx of foreign military. And even then it will be a tough go against an enemy will to suicide to complete his mission.
Kenz300 on Sat, 14th Jun 2014 10:46 am
Buy an electric vehicle or better yet a bicycle.
GregT on Mon, 16th Jun 2014 12:33 am
“Buy an electric vehicle or better yet a bicycle.”
Even better yet, move away from largely populated areas, and learn how to grow your own food. Transportation is not a necessity. Food is.