Financial News

  • 16 June 2014, 9:39

Iraq Crisis Threatens Opec Oil Supply Growth

Future growth for the world's leading oil cartel will be severely harmed if militants reach the south of Iraq, a leading energy body has warned.

The International Energy Agency (IEA) said prices could continue to climb if ISIS insurgents took the capital Baghdad or continued towards crucial oil fields and Gulf export facilities near Basra.

The warning was issued to the Organisation of the Petroleum Exporting Countries (Opec) by the Paris-based policy group.

"Concerning as the latest events in Iraq may be, they might not for now, if the conflict does not spread further, put additional Iraqi oil supplies immediately at risk," the IEA said.

But it calculated that "roughly 60% of the growth in Opec crude production capacity for the rest of this decade will come from Iraq."

Opec is a 12-member cartel responsible for a third of global oil production, with Iraq its second-largest producer.

Barrel price for oil is currently at a nine-month high, with oil futures priced at a three-year high.

The IEA is the energy monitoring and policy arm of the Organisation for Economic Co-operation and Development (OECD), described by the Economist magazine as "the rich-country club".

Last month the IEA warned of a supply struggle from Opec - with a number of its member states faced supply disruptions.

Libya has seen its output reduced to below 200,000 barrels per day amid factional fighting, and Iranian output continues to be hampered by western sanctions.

Meanwhile, Nigeria has been affected by the shale revolution in the United States and Venezuela has suffered significant production limitations.

Key producer Saudi Arabia has said it could make up near-term shortfalls to keep the target of a combined 30 million barrels a day heading to world markets.

But the IEA said OPEC must boost output by 800,000 barrels daily in the second half of this year to meet demand.

The energy agency said that Iraq's relatively small output from the north of the country has been off the market since March due to violence, while output from the south has been on the rise and production has hit a 30-year high.

:: Opec was founded in Baghdad in 1960, to help exporting countries influence prices and break the stranglehold held by the so-called seven sisters, key western oil companies that dominated the global industry.

 

 

Advertisement