Oil Market Keeps Tab On Iraq Turmoil

Oil prices have barely changed as fears of increasing instability in Iraq, a major oil producer, have subsided amid the belief that its oil exports will not be affected in the near future.

The fall of Mosul, Iraq’s second-largest city, has raised concerns about whether the country can rebuild its energy infrastructure and production to meet the global demand. However, Iraq’s oil exports have so far been beyond the militants’ reach.

“Oil production in the south of the country is still secure,” noted analysts at Commerzbank in Frankfurt in a note to clients, saying around 90% of Iraq’s oil exports of 2.5 million barrels a day were shipped from there.
The northern town of Tal Afar is the latest to be captured by the militants and they have vowed to march to Baghdad, the capital of Iraq.

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said the market will keep a ‘risk premium’ of $3-4 a barrel in the price of oil as it watches the situation in Iraq.

“The timing of the situation in Iraq could threaten the possibility that motorists see lower prices this summer as we had anticipated in our earlier forecasts,” said Patrick DeHaan, a senior petroleum analyst at GasBuddy.com.