Oil Prices To Get Boost From Latest Iraqi Fighting

Iraqi military intervention in inter-Kurd fighting over the town of Arbil in northern Iraq has occurred at a time when global oil inventories are low and world oil demand is booming.

Traders say world benchmark North Sea Brent Blend crude oil should top $21 a barrel and hit their highest levels in more than four months in nervous reaction to Iraqi warnings to the US on Sunday to keep out.

Oil prices are already running some $4 above year-ago levels and analysts said they saw no sign of any immediate retreat.

There is no reason why Brent should not hit above $21 on Monday. With all the tensions in West Asia right now and in a balanced market, oil prices should stay firm for some time to come, said Geoff Pyne, oil economist at Swiss Bank UBS.

 

Pyne said the latest conflict may put off indefinitely the return of Iraqi oil exports.

October Brent closed up four cents at $20.78 on Friday amid renewed speculation that the May 21 oil-for-food deal with the UN might get further delayed. The question may be not when will Iraqi oil sales start but whether they will start, Pyne said.

President Bill Clinton put US troops in the Gulf on high alert after Saturdays attack on Arbil. Iraq warned Washington to stay out of its Kurdish north and vowed to turn it into another Vietnam if Washington intervened. In recent months, oil prices have been supported by heightened tensions between the US, the worlds largest oil consumer, and several major West Asian oil producers.