The Bunker Review is contributed by Marine Bunker Exchange
Brent and WTI crude oil prices surge on Thursday as conflict and violence in Northern Iraq escalates. The Brent crude jumped more than $2 to over $112 a barrel on worries that escalating violence in Iraq could disrupt oil supplies from the major OPEC exporter.
An earlier silent market response to news that Sunni rebels had overrun Iraq’s second-largest city Mosul and moved in on its largest refinery at Baiji has given way to growing worries as the al Qaeda splinter group appeared to make rapid advances toward the Shi’ite-led government in Baghdad, causing fear that it will threaten the Iraqi oil exports. Concern that the Bagdad controlled Iraqi army was disintegrating and could no longer secure key oil facilities in the country. – However, Iraq’s main oil export facilities are in the largely Shi’ite areas in the south of the country, where al Qaeda-inspired groups enjoy little sympathy. Those facilities, which ship about 2.6 million barrels per day (bpd), were “very, very safe”, the country’s Oil Minister Abdul Kareem Luaibi, said on Wednesday. The possibility of U.S. intervention in Iraq is another sign of how desperate the situation is and how weak the government has become.
OPEC, which supplies about 40 percent of the world’s crude, kept its production target unchanged at 30 million barrels a day, a decision that was widely anticipated, was declared on Wednesday. The group forecasts demand for its crude of 30.4 million barrels a day in April, the organization’s data show.
In Libya, output has fallen to a 10th of pre-conflict capacity because of protests at oil fields and strikes at export terminals. Iran faces an end in July to relief from sanctions, which have reduced oil exports, if it cannot reach a broader deal on its nuclear program. OPEC considers “everything is good, stable and everyone is happy”. The Saudi Arabia is able to raise production as high as 12.5 million barrels a day and sustain it there. Saudi produced 9.705 million barrels a day in May.
The U.S. inventories fell by 2.6 million barrels last week, while gasoline supplies grew, the U.S. Energy Information Administration reported yesterday. Stockpiles at Cushing, Oklahoma, the delivery point fot WTI, slid by 198,000 barrels to 21.2 million, the report shows. Supplies at the largest U.S. storage hub have decreased since the southern leg of the Keystone XL pipeline began moving oil to Gulf Coast refineries in January.
We expect oil prices are likely to rise next week.
All prices stated in USD / MT
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)