The Islamist insurgency in Iraq highlights the risks to oil supply from a nation forecast to provide about 60 percent of OPEC’s output growth in the rest of this decade, the International Energy Agency said.
Iraqi Oil Minister Abdul Kareem al-Luaibi speculated yesterday that U.S. planes may bomb his nation’s north as militants linked to al-Qaeda, who captured the city of Mosul this week, moved south toward Baghdad. The country’s crude output capacity will increase by more than 1.2 million barrels a day in the six years through 2019, the Paris-based IEA estimated in its monthly oil market report today.
“While Iraq’s production potential is huge, so are the political hurdles it is facing – and nothing provides a clearer example of that risk than the military campaign,” the IEA said. “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.”
Benchmark North Sea crude rallied to an nine-month high as violence escalated in Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries. The 12-member group, which supplies about 40 percent of the world’s oil, kept its production target unchanged at a meeting in Vienna this week.
Brent futures for July delivery climbed as much as 1.5 percent to $114.69 a barrel in London on the ICE Futures Europe exchange. That’s the highest since Sept. 9. It traded at $114.59 as of 8:49 a.m. in London.
OPEC pumped 29.99 million barrels of crude a day in May, up from 29.91 million in April, according to the IEA. Of that, Iraqi crude output accounted for 3.37 million barrels a day versus 3.32 million the previous month.
Demand for OPEC’s crude will rise to 30.9 million barrels a day in the second half of this year, an increase of 150,000 barrels a day from the IEA’s estimate last month.
Worldwide oil consumption will increase 1.3 million barrels a day, or 1.5 percent, to 92.8 million barrels a day this year. Supplies from outside of OPEC are projected to climb to 56.2 million barrels a day. Both forecasts are little changed from last month.
The report was shorter than normal because the agency is publishing its annual medium-term oil market report on June 17.
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