MARKET WATCH: Oil futures climbing on Iraq’s instability

Crude oil futures climbed on both the New York and London markets June 19, which analysts said was largely driven by rising concerns about instability in Iraq and ongoing risks to Iraqi oil production. Brent crude oil prices briefly reached a 2014 high of $115.71/bbl June 19 before closing just above $115/bbl.

Barclays Capital Inc. analysts noted militants seeking to undermine the Iraqi government have focused on northern Iraq so far and there have been no attacks on key oil fields in southern Iraq, but the region is within reach of extremist groups.

"We believe that any significant uptick in unrest in the south, even if oil facilities were spared, would likely accelerate the exodus of foreign oil workers out the country," Barclays said. Exxon Mobil Corp. and BP PLC reportedly have begun withdrawing employees from Iraq.

Meanwhile, fighting continued at Iraq’s largest refinery in Beiji, which is 200 km north of Baghadad. The government is battling militants representing the Islamic State of Iraq and al-Sham, known as ISIS.

Fire broke out previously after militants attacked the 310,000-b/d hydroskimming and hydrocracking refinery in Salahudin province (OGJ Online, June 18, 2014).

US President Barack Obama met with his national security team and then had a news conference in Washington DC June 19. Obama said the US would not be opposed to Iraqis replacing Prime Minister Nouri al-Maliki, a Shiite, confronted with trying to reconcile differences with Iraq's Sunni minority.

Obama ordered up to 300 members of US special-operations forces to Iraq as advisers, but he ruled out immediate US airstrikes against Sunni extremists. The Obama administration and US lawmakers are increasing pressure on the Iraqi government to resolve Iraq’s ethnic and religious divisions.

"Now, it's not the place for the United States to choose Iraq's leaders," Obama said June 19. "It is clear, though, that only leaders that can govern with an inclusive agenda are going to be able to truly bring the Iraqi people together and help them through this crisis."

Energy prices

The New York Mercantile Exchange July crude oil contract price gained 46¢ on June 19 to close at $106.43/bbl. The August contract also climbed 46¢ to $106.05/bbl.

The natural gas contract for July fell 7.5¢ to a rounded $4.58/MMbtu. On the US cash market, gas at Henry Hub, La., was $4.64/MMbtu, down 6¢.

Heating oil for July delivery was up 1.2¢ to a rounded $3.05/gal. Reformulated gasoline stock for oxygenate blending for July delivery gained 2.7¢ to a rounded $3.12/gal.

The August ICE contract for Brent crude delivery rose 80¢, closing at $115.06/bbl. The September contract climbed 79¢ to $114.38/bbl. The ICE gas oil contract for July increased $3.75 to $938.75/tonne.

The Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for June 19 was $110.26, up 66¢ from June 18.

Contact Paula Dittrick at paulad@ogjonline.com.

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