Yesterday energy analysts warned of a significant global price jump for oil if Iraq’s southern oil fields are captured and shut down, but commodity prices appear to be disconnected this week from the potentially serious threat to Iraq’s oil production, after posting a four percent gain during last week’s escalation of hostilities.
Raymond James’ Managing Director Marshall Adkins said that a two million BOPD interruption to global supply could send the price of Brent crude as high as $150. “I am surprised at the lack of movement given the potential for supply disruption,” Adkins told Oil & Gas 360® yesterday.
Today NBC News reported that “Brent rose 17 cents to $113.62 a barrel by 1445 GMT. U.S. crude however was 6 cents lower at $106.30 a barrel after a smaller than expected draw in domestic stocks.”
Other experts have expressed similar price concerns. “The continued advances of ISIS into Baghdad and southern Iraq could seriously disrupt Iraq’s oil industry with quite devastating effects on the global economy,” said John Hannah, advisor to Vice President Dick Cheney and the State Department under Presidents George H.W. Bush and Bill Clinton. Speaking further about Iraq in an interview with Newsmax, Hannah said, “Right now, the direct threat to Iraqi oil production is limited. However, if you’re a Western oil operator with people and equipment on the ground, and you see the barbarian hordes approaching the gates of Baghdad and southern Iraq [where Iraq’s major oil fields are located], you’re going to want to get out fast.”
According to Reuters: “Almost all Western oil majors work with Baghdad on joint projects including Exxon Mobil (ticker: XOM), BP (ticker: BP), Royal Dutch Shell (ticker: RDS.B), ENI (ticker: E), Russia’s Gazprom Neft (ticker: SIBN.ME), Lukoil (ticker: LKOH) and Chinese firms. BP said it had sent non-essential staff in Iraq home and its operations there have not so far been affected. Lukoil and Gazprom said the fields they operate in Iraq are distant from the fighting and there is no need to fear disruption to output. The Kirkuk oilfield is the basis of Iraq’s northern production. Kirkuk is connected to world markets by pipeline to Turkey’s port of Ceyhan. Exports have been shut since early March due to attacks on the pipeline.”
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