Oil prices peak as conflict in Iraq escalates

Speculation, evacuation and an escalation in fighting between Iraqi governmental troops and rebel Sunni fighters from the Islamic State in Iraq and Syria (ISIS) have unsettled crude oil prices.

Speculators in West Texas Intermediate (WTI) have raised their benchmark net-long position on crude oil prices by 4.3% in the week ended June 17th – Commodity Futures Trading Commission data has shown (Futures).

Reports showing a steady advance by ISIS troops towards Baghdad have created fears of the entire region being consumed in conflict. BP, EXON Mobile and other oil companies have already started evacuating employees out of the country.

The rebels have also claimed to have captured a key oil refinery – one of the largest in Iraq – at Baiji, just north of Baghdad.

The refinery, in the Salahuddin province, supplies a third of Iraq’s refined fuel – its capture has already led to petrol rationing, with export losses expected to fluctuate the market even more.

Gruesome boasts by ISIS also suggest the mass execution of 1,700 Iraqi soldiers in the province, earlier this week.

Meanwhile, reports are also confirming the capture of Mosul, the second largest city in Iraq, by rebel forces.

Talking to Bloomberg, Michael Lynch, the president of Strategic Energy & Economic Research in Winchester, Massachusetts, said, “The betting is that there’s a greater chance that the price will go up further.”

“The fighting is almost certainly going to escalate, and the worse it gets, the more likely you’ll have some threat to the oil supply.” 

The conflict is actually helping to boost US gasoline prices. Futures rose to $3.1277 a gallon, an 11-month high, on June 20^th.

The conflict is expected to postpone or end investment into the region as it struggles to remain stable – but hopeful talks between US secretary of state John Kerry and Iranian military may see the conflict being concluded far quicker.

An expected humanitarian crisis is unfolding as thousands of civilians have been displaced – forced to flee into neighbouring countries and regions.

Both the UN and EU have encouraged the Shiite Iraqi government to make Sunni inclusive policies to calm rising tensions.

Photo source: Bernardo62 via Flickr

Further Reading:

Carbon bubble: Obama admits world cannot burn all known fossil fuel reserves

Climate change a ‘catalyst for conflict’ 

World Bank head warns of conflict and social unrest due to climate change