Brent crude rises above USD 113 on Iraq tensions
Brent crude edged further above USD 113 a barrel, up about USD 4 since the start of the week, on concerns that an insurgency in Iraq could trigger civil war and eventually hit oil exports.
Iraq’s most senior Mr Shia cleric urged his followers to take up arms to defend themselves against the advancing Sunni militants, potentially escalating the conflict.
Mr Olivier Jakob at Petromatrix consultancy said that “The market in general is trying to assess the risks on Iraq. There was a big market reaction and then the International Energy Agency said it did not see a risk to supplies so the volatility is reflecting this.”
Most of Iraq’s current oil exports come from south of Baghdad, still far from the Islamist rebel fighters. Should they reach south of the capital, analysts expect them to encounter much greater resistance.
Iraqi exports from the north are considered safe for the moment as the major Kirkuk oil hub is held by Kurdish forces.
Mr Ayham Kamel, director for the Middle East and North Africa at Eurasia Group, wrote in a research note earlier this week that “While the Iraqi military faces low morale issues in the north, Mr Shia fighters would prove much more resilient in protecting their homes and provinces in southern Iraq, and Sunni insurgents have no local support.”
Brent was up seven cents at USD 113.09 per barrel as of 1456 GMT, off a peak of USD 114.69, its highest since September. It gained more than USD 3 on Thursday.
US crude was up 12 cents at USD 106.65, off a high of USD 107.68, also a 9 month peak. A day earlier it gained USD 2.13. Brent was set to gain more than five percent this week, the biggest weekly rise since last July, while US crude was on track for its biggest jump since December.
Mr Jakob at Petromatrix said that “You want to have a premium as Iraq is more unstable than last week, but with no disruptions, how much can you keep.”
The United States has threatened military action against Islamist militants who have taken towns and cities in Iraq, raising concerns over its oil exports.
Local officials and witnesses said that the militants, a Sunni offshoot of Al Qaeda, were moving into 2 towns in the eastern province of Diyala after security forces abandoned their posts. Iraqi army helicopters fired rockets on one of the largest mosques in the city of Tikrit.
Source - Reuters