Brent crude oil slipped below $105 a barrel today as US intervention in Iraq eased concerns over the risk of disruption to supply from Opec's second-largest producer.
Oil prices jumped sharply at the end of last week as Islamic State fighters made rapid gains in parts of northern Iraq, threatening Iraqi Kurdistan and coming within striking distance of some more of the country’s oilfields.
But US air strikes on the Sunni insurgency calmed market worries over the risk to oil production, helping pull prices lower again. Oil exports from southern Iraq are near record levels and the Kurdistan Regional Government's (KRG) oil pipeline via Turkey is operating normally and pumping 120,000 barrels per day (bpd) of crude oil.
Iraqi Kurdistan said on Friday its oil output remained unaffected. Brent was down 20 cents at $104.82 a barrel earlier. The contract jumped more than $1 to hit a weekly high of $106.85 on Friday before settling 42 cents lower. US crude gained 10 cents to $97.75 a barrel.
"The oil market is not as worried now about what is happening in Iraq," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. "The market has become more complacent about supply again. But complacency is dangerous. Given the geopolitical tensions, a spike in oil prices cannot and should not be ruled out."
Oil markets are well supplied in most parts of the world, and North Sea crude oil for immediate delivery is trading at a discount of $1 to $2 below the Brent futures front month.
Prompt Brent prices are unlikely to move higher unless there’s a significant disruption in supply, analysts argue, although prices have risen in the future months because of concerns about future output growth.
“Oil markets are now well supplied, but forward futures prices suggest the low prices won’t last,” Mr Fritsch said.
Mark Keenan, head of commodities research Asia at Societe Generale, agreed: "You've got geopolitical risks affecting long-term prices more than short-term prices which is obviously unusual," Mr Keenan said.
Ample Opec production has also weighed on oil prices. Opec said its members increased output in July despite violence in Iraq and Libya. The cartel trimmed its 2014 global oil demand growth forecast.
Reuters
