Spreading Iraq turmoil could send Brent crude to $125 and beyond


July Brent crude hit a nine-month high of $114.69/bbl earlier today, but has since stabilized at ~$113 after the IEA said Iraqi oil supplies are not at immediate risk; most of Iraq’s oil production, export facilities and reserves are in the largely Shia areas in the south, where Islamist rebels enjoy little support.

But such a forecast assumes the conflict doesn't spread; if it does, there is "no doubt" that Brent could reach $125/bbl and beyond, says PVM Oil Associates' David Hufton, who adds that Saudi Arabia has 2M bbl/day of capacity it can turn on fairly quickly but that leaves no spare capacity margin.

Even if the insurgents don't advance to the south, the long-feared fragmentation of Iraq along sectarian lines has been set in motion, which damages the outlook for investment and production growth in Iraq in coming years, a period when Iraqi supply additions are critical to market balances, according to analysts at Energy Aspects.

ETFs: USO, OIL, UCO, SCO, DTO, BNO, DBO, CRUD, USL, UWTI, DWTI, DNO, SZO, OLO, OLEM, TWTI

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Comments (2)
  • Gary Jakacky
    , contributor
    Comments (2954) | Send Message
     
    Fragmentation would DECREASE investment? I believe most of the oil is in the Kurdish north and Shia south, correct? As separate states they can negotiate with the oil companies and let the Sunnis rot in the middle.
    13 Jun 2014, 02:54 PM Reply Like
  • akwils
    , contributor
    Comments (154) | Send Message
     
    really? what was the price of oil when Iraq stopped producing?
    13 Jun 2014, 03:28 PM Reply Like
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