16 June 2014, News Wires – Brent crude rose above $113 per barrel to near a nine-month high on Monday as Sunni insurgents advanced in Iraq, intensifying concerns over a potential disruption to oil exports from the second-largest OPEC producer.
The sudden eruption of violence in Iraq led to a sharp spike in prices last week, with both Brent and US crude gaining over 4% – the most since July and December respectively.
The rally began losing steam from Friday as the market waited to see if the conflict would threaten oil refineries south of Baghdad.
“It’s a bit calmer now because people realize [the militants are] not just going to just roll right into Baghdad. But still it looks like the country is headed to civil war, which will mean a higher risk premium build into oil prices,” Mitsubishi oil risk manager Tony Nunan told Reuters.
“This may not mean a stop to Iraqi exports immediately, but it probably will affect the Iraq’s ability to increase their production rate,” he said.
Brent crude for August delivery rose $0.61 to $113.07 per barrel by Monday morning.
The July contract, which expired on Friday, settled $0.39 higher at $113.41 per barrel, the highest since 9 September.
US oil climbed $0.44 cents to $107.35 per barrel. On Friday, it rose as high as $107.68 before settling up $0.38 cents at $106.91 per barrel.
Sunni insurgents on Sunday seized a mainly ethnic Turkmen city in northwestern Iraq on Sunday after heavy fighting, solidifying their grip on the north.
Yet for the moment the immediate threat to Iraq’s oil supplies – most of which is hundreds of miles to the south of the fighting – remains limited, analysts and consultants say. Northern exports have run at a trickle for months, and few had expected a rapid recovery.
Should the militants advance south of the capital, analysts expect them to encounter much greater resistance, while Iraqi exports from the north are considered safe for the moment as the major Kirkuk oil hub is held by Kurdish forces.
President Barack Obama said on Friday he needed several days to determine how the US would help Iraq deal with the Islamists’ advance, but he ruled out sending US troops back into combat in Iraq
In Libya, its western El Feel oilfield has resumed production after security guards ended a protest that lasted more than two months, oil ministry officials said, but many oilfields and ports remain blocked.
Production at El Feel will reach 80,000 barrels per day within 24 hours, an official reportedly said on Sunday.
OPEC will have to produce a million barrels per day more oil on average in the second half of 2014 to balance the global market, which will see a steep seasonal spike in demand, the International Energy Agency (IEA) said.
The IEA said in its monthly report it had raised its estimate of the demand for OPEC crude oil in the second half of this year by 150,000 bpd from its forecast last month to an average of 30.9 million bpd.