Guest Blog, Abshire-Smith Iraq Country Manager
12/06/2014 14:30 (London)
Iraqi forces sought to check the rapid advance of Islamist militants who had seized major cities, including Iraq’s second largest city, and Saddam’s hometown of the Tikrit. What has concerned energy markets is the control of one of Iraq’s largest refinery Beiji which produces 310,000 BPD. However State media has just reported that Iraq’s Oil Minister Abdul Kareem Luaibi said that the refinery is now back under government control. Escalations of Russia sanctions and the disruptions in Libya has put a bid into Crude.
Luaibi has stated that Iraq was not importing any additional fuel and that stored supplies of gasoline and diesel were good. The country's crude oil exports from its southern terminal at Basra were running at an average 2.6-2.7 million barrels per day as of Wednesday.
Developments in Kirkuk
Kurdish armed forces have taken control of the entirety of Kirkuk, home to the biggest northern oilfield, Kurdish television Rudaw had reported today. The Kurdish authorities who control that part of northern Iraq deployed more of their Peshmerga fighters to fortify defensive positions and protect the cities for Kirkuk and Mosul.
This comes after a recent heated exchange between the Kurdistan Regional Government and Baghdad over the rights to who sells Kurdish oil. Russian oil firm Rosneft recently bought a cargo of Kurdish oil for a German refinery it co-owns with oil major BP, quietly circumventing Baghdad's ban on independent oil sales by its autonomous region, according to trading sources.
The advance of ISIL fighters has rattled markets in both Iraq and Turkey. Iraqi stocks fell 1.7 percent, the sixth day of declines. The yield on $2.7 billion of government securities due January 2028 climbed 3 basis points to 6.93 percent, the highest since May 1 on closing a basis, according to data compiled by Bloomberg.
Brent crude oil rose to the highest since the start of March, and West Texas Intermediate to an eight-month high as violence escalated in Iraq. Brent rose as much as 2.1 percent to $112.29 a barrel. WTI, the U.S. benchmark, advanced 1.9 percent.
This continued unrest along with Kurdish aspirations to sell oil independently will play a major role in energy markets in the coming weeks, with all fundamentals in play it looks like we should expect further bullish trends in the oil.
At the time of writing Brent Crude is trading at $111.85 and WTI Crude for delivery in July $106.08 a barrel.
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