The Price of War: Iraqi Oil Soars

- Advertisement -

THESSALONIKI – The outbreak of violence involving militant groups who seized two cities in Iraq and have pledged to march on Baghdad added to concerns over security and the country’s plans to expand oil production, pushing crude oil prices to ten-month highs on June 13. One of those two cities, Mosul, lies in an area that is a major gateway for Iraqi oil.

Upheaval in Iraq could throw the world’s oil market out of balance. “The markets were tight to start with and many people thought that there would be an increase in the price,” Narsi Ghorban, Secretary to ICC Environment and Energy Commission, Iran Committee, told New Europe on June 12.

“On top of that, suddenly we have the problems in Mosul whereby the whole infrastructure of Iraq would be in jeopardy,” Ghorban said on the sidelines of a regional energy conference by the Institute of Energy for South-East Europe (IENE) in Greece’s northern port city of Thessaloniki.

“This is an additional kick to the market. On top of all that you don’t have Iran coming back to the market in full force soon because the limit is about 1-1.2 million barrels per day because of the sanctions,” he said, adding that all these factors together put pressure on the excess production capacity available in the market.

Iraq’s troubles unfolded last week as the northern export pipeline, which can carry some 600,000 barrels a day of crude from Kirkuk to the Turkish Mediterranean port of Ceyhan, has not been operating since early March due to repeated bombing by insurgents.

On June 13, the insurgency in deeply-divided Iraq spilled over to energy markets for a second day. After jumping over $2 on June 12, the benchmark US oil contract for July delivery was up 15 cents to $106.68 a barrel in electronic trading on the New York Mercantile Exchange. It had earlier hit a high of $107.68. Brent crude, a benchmark for international oils, was up 54 cents to $112.96 a barrel on the ICE Futures exchange in London.

Ghorban shrugged of analysts’ predictions that crude oil prices might reach $120 per barrel. “It has to break a lot of barriers in order to get there. But we are going to see the higher ranges rather than the lower ranges,” he said.

On June 11, the Organization of Petroleum Exporting Countries (OPEC) agreed to keep their output target unchanged at 30 million barrels a day. The oil market is “very stable,” OPEC Secretary General Abdullah Al-Badry said.

Most OPEC members may not be able to substantially increase output in the short-term. “OPEC can do very little,” Ghorban told New Europe. “The production in Libya and Iran are curtailed. Iraq – as far as the big hope – is not doing well. Saudi Arabia has a limit to it,” he added.

However, Ghorban is optimistic that more oil will come from Iran in the long run. “Iran one way or another is going to come up with a lot more oil,” he said. The Islamic Republic will try to go back to 2 million barrels, he said, adding that Iranian oil production can go much higher if the sanctions are lifted. “But it takes time,” he quipped.

follow on twitter @energyinsider

Previously on Energy Insider:

Scotland, Crimea, East Ukraine Eye Energy On Independence

Poland Spearheads EU Quest For Energy Independence

Putin: “Dasvidaniya” EU, “Ni Hao” China

 

- Advertisement -

Subscribe to our newsletter

Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

Latest

On the two-year anniversary, G7 Foreign Ministers address the devastating war in Sudan

After nearly 23 months of war, on March 21,...

Doom, gloom or boom?

While it is an almost painful daily task to...

Don't miss

On the two-year anniversary, G7 Foreign Ministers address the devastating war in Sudan

After nearly 23 months of war, on March 21,...

Doom, gloom or boom?

While it is an almost painful daily task to...

Romania utilizing all available resources to boost its energy independence

Romania is using all energy resources available, including natural...

Romania utilizing all available resources to boost its energy independence

Romania is using all energy resources available, including natural gas as the country advances rapidly with Neptun Deep gas project and new wind and...

Apollo Funds to partner with BP on TANAP gas pipeline from Azerbaijan to Turkey

British energy company BP said on March 21 it has reached agreements for Apollo-managed funds to purchase a 25 percent non-controlling stake in BP...

Caspian-Black Sea Green Energy Corridor countries push project forward

The Ministers of Azerbaijan, Georgia, Hungary and Romania met in Budapest on March 10, where they signed a joint letter to EU Energy Commissioner...

EU signs critical raw materials, energy and infrastructure deals with Kazakhstan

As part of the visit of EU Commissioner for International Partnerships Jozef Síkela to Astana, the European Union and Kazakhstan signed on March 13...

Weaning Europe off its Russian gas addiction

The Viking hero Ragnar Lodbrok once said “don't waste your time looking back. You're not going that way.” The words of the former king...

EU-Kazakhstan boost cooperation in energy, raw materials, transport, sustainability

The European Union and Kazakhstan have discussed at a meeting in Brussels the successful implementation of the Memorandum of Understanding between the Central Asian...

Tashkent’s busy diplomatic agenda

In the coming months, Uzbekistan will host high-profile summits between Central Asia with the European Union and the Gulf Cooperation Council. As global geopolitics...

Tajikistan: The Battle for Middle Earth’s Resources

Tajikistan is a small land-locked country tucked away in southeast Central Asia. Its capital, Dushanbe, is almost equally distant, at approximately 4,500 kilometers, from...