International

Oil near $105 after renewed ISIS advance in Iraq

File - Oil prices have fallen more than $10 in the past six weeks despite unrestin the Middle East and North Africa.

LONDON: Brent crude oil held near $105 a barrel Thursday as the security situation deteriorated in northern Iraq and Islamist militants made gains against Kurdish forces, advancing closer to the autonomous region’s oil fields.

Two car bombs killed nine people in the Kurdish-held Iraqi oil city of Kirkuk, police and medical sources said, after an offensive by ISIS fighters that has routed Kurdish forces.

Traders said production in Iraq’s northern oil fields was increasingly at risk as the fighting escalated.

“The situation there is certainly not getting better at the moment. It’s hard to see a near-term solution there,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam. “I think the market should keep in mind that oil production from the north part of Iraq cannot be expected.”

Brent crude was up 40 cents at $104.99 a barrel by 13:50 GMT, after closing at $104.59 Wednesday, its lowest finish since Nov. 7.

U.S. crude was up 12 cents at $97.03 a barrel, after reaching a six-month low of $96.69 in the previous session.

ISIS militants have extended their gains in northern Iraq, seizing more towns and strengthening a foothold near the Kurdish region.

Shares in Oslo-listed oil producer DNO fell as much as 24 percent on news of the insurgents’ advance, heightening fears among investors in firms exposed to the autonomous Kurdish region.

The company said that its operations at the Kurdish Takwe field near Iraq’s Turkish border had not been affected.

Van Cleef said the market impact would be limited as long as Iraq’s mass-producing southern oil fields were unaffected.

“As long as the oil exports from the southern part of Iraq are not affected then, for the impact on oil prices, we would expect it to increase risk premiums, but that’s basically it,” he said.

Oil prices have fallen more than $10 a barrel over the past six weeks, as global supply exceeded demand, despite unrest in North Africa and the Middle East and an escalation in tensions between Russia and the West.

Moscow imposed a ban on imports of many Western foods in retaliation against sanctions over Ukraine, a stronger-than-expected measure that isolates Russian consumers from world trade to a degree unseen since Soviet days.

 
A version of this article appeared in the print edition of The Daily Star on August 08, 2014, on page 6.

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