How High Can Unrest in Iraq Push Oil Prices?

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June 13 (Bloomberg) -- Seth Kleinman, head of energy strategy at Citigroup Global, examines the impact of the violent unrest in Iraq on oil markets, the possible political complications of the United States offering support against the insurgents and the global geopolitical risks that have impacted oil this year. He speaks on Bloomberg Television’s “Market Makers.”

It felt like kind of a delayed reaction to what we had seen play out in iraq earlier this week.

Brent is still only at $113 per barrel.

I say only, not because it hasn't moved meaningfully -- it has.

But we read hundred $13 just a few months ago.

That is true.

The reality is, it is very concerning what is happening in iraq.

Both for the people and for the economy.

The world needs iraqi oil.

It needs iraqi not to descend into civil war.

Right now, they are exporting oil from the south.

We have about $2 million -- 2 million barrels a day.

If you look longer-term, their estimates are at 2035, a rock will count -- iraq will count for half of the supply.

Right now, the oil production is in the south.

The situation is fluid, so the market is obviously very concerned.

The market is concerned, but what is the market pricing?

Are we at a point where the $113 represent a loss of traction in the south?

I think right now the market is pricing in uncertainty.

It is hard to put a value on something that is hopefully a low probability event.

It could potentially be a massive impact.

This is another one of those events.

I think there is uncertainty, but don't expect us to leave oil anytime soon.

Can i just play the contrarian?

It has been difficult to get oil out of the northern part of the country because the kurds and iraqis cannot agree on how to split revenue.

If they take a preeminent role in this conflict, does that give the kurds were ability to export down the road?

It could.

There are unpredictable ways this could play out in terms of geopolitics.

You could see a alignment between the kurds, the iranians, and united states.

Everyone is trying to reduce the impact of this extreme sunni organization.

At the same time, if you see the united states or ron acting against the sunni, you could see increased support for them in a rock.

You could see closer cooperation between baghdad and more kurdish oil would flow.

But it is very uncertain.

We hear talk about developed countries releasing their strategic petroleum reserves?

I haven't heard anything yet, but i suspect those conversations are being had behind closed doors.

I think back to 2011, and the libyan crisis broke out.

The libyan oil supplied effectively disappeared from the international market.

You saw brent react much more strongly, topping $120. is that we are likely to see if the situation deteriorates in a rock -- in iraq?

What is really kept the cap on oil prices so far is the united states, the u.s. shale story.

U.s. production is continuing to grow one million barrels a day.

That is a huge number.

Oil is about a $90 billion -- 90 billion barrel a day market.

If you really saw iraqi volumes disrupted, then clearly, $120 would be in the market place pretty quickly.

Those who are invested in the market said this week -- water investors calling you most about now?

It's funny.

Coming into this year, it looked benign.

Yes we had issues, but mostly it was iran and libya.

We seem to be making some progress with iran.

But now, libya has really gone worst case scenario.

Iran looks like there is progress, but it is not clear.

Then russia, ukraine comes along.

It's totally out of left field, not on anyone's radar.

This text has been automatically generated. It may not be 100% accurate.


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