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| Fears About Iraq Continue to Push Up Oil Prices | Fears About Iraq Continue to Push Up Oil Prices |
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| LONDON — The oil markets are likely to remain on edge, as escalating tensions in Iraq prompt concerns over supplies in the major oil-producing country. | LONDON — The oil markets are likely to remain on edge, as escalating tensions in Iraq prompt concerns over supplies in the major oil-producing country. |
| Although a sharp spike in prices looks unlikely at this point, the fighting in Iraq and turmoil in other major oil producers are expected to keep prices relatively high, a situation that could put pressure on gasoline prices during the summer driving season. | Although a sharp spike in prices looks unlikely at this point, the fighting in Iraq and turmoil in other major oil producers are expected to keep prices relatively high, a situation that could put pressure on gasoline prices during the summer driving season. |
| “I think the upward movement is justified even though the direct threat to Iraqi supply is low,” said Richard Mallinson, an analyst at Energy Aspects, a London research firm. | “I think the upward movement is justified even though the direct threat to Iraqi supply is low,” said Richard Mallinson, an analyst at Energy Aspects, a London research firm. |
| So far, the fighting has largely been isolated to cities in the north, including Mosul and Tikrit, where the fighters of the Islamic State of Iraq and Syria have taken control. Iraq’s main oil fields and export facilities are clustered around the city of Basra in the south. | So far, the fighting has largely been isolated to cities in the north, including Mosul and Tikrit, where the fighters of the Islamic State of Iraq and Syria have taken control. Iraq’s main oil fields and export facilities are clustered around the city of Basra in the south. |
| But traders are worried that the action could spread, threatening supplies. Iraq is the second largest oil producer in OPEC, representing the largest source of growth among the 12 member countries. | But traders are worried that the action could spread, threatening supplies. Iraq is the second largest oil producer in OPEC, representing the largest source of growth among the 12 member countries. |
| Of perhaps greater concern is that the growing instability in Iraq and the unrest in other big petroleum-producing countries could alter the geopolitical dynamics that have kept oil prices remarkably stable although relatively high for the last three years. The Russian annexation in Crimea and the chaos in Libya “point to a systemic and seismic shift geopolitically,” Edward L. Morse, head of commodities research at Citigroup, wrote in a note to clients on Friday. | Of perhaps greater concern is that the growing instability in Iraq and the unrest in other big petroleum-producing countries could alter the geopolitical dynamics that have kept oil prices remarkably stable although relatively high for the last three years. The Russian annexation in Crimea and the chaos in Libya “point to a systemic and seismic shift geopolitically,” Edward L. Morse, head of commodities research at Citigroup, wrote in a note to clients on Friday. |
| Amid the uncertainty, oil prices have been rising modestly in recent days. On Friday, Brent crude, the international benchmark, rose about 0.25 percent to $113.32. West Texas Intermediate, the standard in the United States, was up 0.1 percent to $106.66. | Amid the uncertainty, oil prices have been rising modestly in recent days. On Friday, Brent crude, the international benchmark, rose about 0.25 percent to $113.32. West Texas Intermediate, the standard in the United States, was up 0.1 percent to $106.66. |
| Until recently, market participants have been expecting that the supply from Iraq, which is now producing about 3.3 million barrels a day, would continue to grow, as a result of international oil companies’ investments in the country’s rich but battered oil fields. In a benign world, Iraq could eventually produce about 6 million barrels a day, analysts estimate. If Iraq did attain that level, it would be about 60 percent of the roughly 10 million barrels a day that the leading oil-producing countries, Russia and Saudi Arabia, each produce. | |
| “The longer the insurgency lasts, the more difficult it will be for Iraq to reach its potential,” Mr. Morse wrote. The change in outlook on Iraq “has radical implications for oil markets at a time of growing lost production worldwide due to intensifying disorder in a growing number of petroleum-producing countries,” he added. | “The longer the insurgency lasts, the more difficult it will be for Iraq to reach its potential,” Mr. Morse wrote. The change in outlook on Iraq “has radical implications for oil markets at a time of growing lost production worldwide due to intensifying disorder in a growing number of petroleum-producing countries,” he added. |
| Chaos in Libya has reduced oil production there to around 10 percent of the 1.3 million barrels a day the country produced in 2012. Iran’s output has been trimmed by international sanctions. Syria’s civil war has severely diminished the country’s oil production. And the industries of two other key exporters, Nigeria and Venezuela, are facing their own difficulties. | Chaos in Libya has reduced oil production there to around 10 percent of the 1.3 million barrels a day the country produced in 2012. Iran’s output has been trimmed by international sanctions. Syria’s civil war has severely diminished the country’s oil production. And the industries of two other key exporters, Nigeria and Venezuela, are facing their own difficulties. |
| Market jitters may increase during the summer, when travel season increases demand for gasoline and jet fuel. The big Gulf Arab producers — Saudi Arabia, Kuwait and the United Arab Emirate — are expected to increase oil production to cope with increased demand, but analysts say their buffer of unused, or spare, capacity is likely to be trimmed to about 2 million barrels a day. Reducing that buffer means it could be difficult to compensate for any further problems in oil-producing countries. | Market jitters may increase during the summer, when travel season increases demand for gasoline and jet fuel. The big Gulf Arab producers — Saudi Arabia, Kuwait and the United Arab Emirate — are expected to increase oil production to cope with increased demand, but analysts say their buffer of unused, or spare, capacity is likely to be trimmed to about 2 million barrels a day. Reducing that buffer means it could be difficult to compensate for any further problems in oil-producing countries. |
| In the near term, concerns about Iraq are likely to remain paramount. Even if the Islamic fighters pause and try to consolidate their gains, the fighting has implications for Iraqi production. | In the near term, concerns about Iraq are likely to remain paramount. Even if the Islamic fighters pause and try to consolidate their gains, the fighting has implications for Iraqi production. |
| For instance, one of Iraq’s major export pipelines runs from Kirkuk in Iraq to Turkey’s Mediterranean port of Ceyhan. This pipeline has been frequently closed by sabotage and other problems for years and has recently been shut for several months. Because it runs through the conflict zone, its reopening now looks delayed for the plannable future. | For instance, one of Iraq’s major export pipelines runs from Kirkuk in Iraq to Turkey’s Mediterranean port of Ceyhan. This pipeline has been frequently closed by sabotage and other problems for years and has recently been shut for several months. Because it runs through the conflict zone, its reopening now looks delayed for the plannable future. |
| The British oil company BP had been discussing investing in the giant Kirkuk field, where production has been about 200,000 barrels a day but could be substantially higher given the field’s estimated 1.8 billion barrels of reserves. BP’s plans now seem unlikely to go ahead anytime soon. A BP spokesman, Toby Odone, said that the company was advising North Oil Company, the Iraqi entity that operates the field, but that a decision on whether to move ahead with a major project was probably at least a year off. | The British oil company BP had been discussing investing in the giant Kirkuk field, where production has been about 200,000 barrels a day but could be substantially higher given the field’s estimated 1.8 billion barrels of reserves. BP’s plans now seem unlikely to go ahead anytime soon. A BP spokesman, Toby Odone, said that the company was advising North Oil Company, the Iraqi entity that operates the field, but that a decision on whether to move ahead with a major project was probably at least a year off. |
| Paradoxically, the unrest may help increase exports from the oil-rich northern Iraqi region of Kurdistan. The Kurdish government has recently opened a pipeline directly linking oil fields in the enclave to Turkey, raising the possibility of substantial exports in the range of 400,000 barrels a day of Kurdish oil though Turkey. | Paradoxically, the unrest may help increase exports from the oil-rich northern Iraqi region of Kurdistan. The Kurdish government has recently opened a pipeline directly linking oil fields in the enclave to Turkey, raising the possibility of substantial exports in the range of 400,000 barrels a day of Kurdish oil though Turkey. |
| Oil sales from Kurdistan have been hampered by the central government in Baghdad’s insistence that Kurdish oil falls under its purview and must be sold through Baghdad’s oil marketing arm, SOMO. Companies like Genel Energy, which is run by the former BP chief executive Tony Hayward, have been limited to trucking their oil out or selling it to local refineries. | Oil sales from Kurdistan have been hampered by the central government in Baghdad’s insistence that Kurdish oil falls under its purview and must be sold through Baghdad’s oil marketing arm, SOMO. Companies like Genel Energy, which is run by the former BP chief executive Tony Hayward, have been limited to trucking their oil out or selling it to local refineries. |
| But the fighting may increase the bargaining power of the Kurdistan Regional Government, analysts say. Citigroup predicts that now that the Iraqi government of Prime Minister Nuri Kamal al-Maliki is in trouble and in need of the share of revenue it could gain from Kurdish oil, Baghdad may prove more flexible. | But the fighting may increase the bargaining power of the Kurdistan Regional Government, analysts say. Citigroup predicts that now that the Iraqi government of Prime Minister Nuri Kamal al-Maliki is in trouble and in need of the share of revenue it could gain from Kurdish oil, Baghdad may prove more flexible. |