Thursday, July 18, 2024
 
 

The Price of War: Iraqi Oil Soars

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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.

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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

 

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

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