Price watch as oil supply threatened

A view from  West Qurna oilfield in Iraq's southern province of Basra. Photo by Reuters.
A view from West Qurna oilfield in Iraq's southern province of Basra. Photo by Reuters.
New Zealand petrol prices are on the watchlist as fighting escalates in Iraq, possibly threatening the global supply of crude oil.

Within the 12-nation Organisation of Petroleum Exporting Countries (Opec), Iraq is the second-largest oil exporter, after Saudi Arabia, but in the short term, the high New Zealand dollar and already high pump prices may create a buffer against rises.

Since last Thursday, global oil prices have surged to nine-month highs, and gained slightly over the weekend, hitting almost $US107 ($NZ123.40) yesterday morning.

Automobile Association petrol watch spokesman Mark Stockdale was contacted and said while global oil prices had risen, petrol and diesel prices had not been affected in New Zealand.

''It's a [global oil price] spike based on speculation.''

He said that after fuel prices rose slightly in April, they fell 2c-3c a litre in early May before increasing 4c a litre later in the month.

''The retailers should be cutting diesel prices, not raising them.''

Mr Stockdale said if there was ''any substantial reduction'' in Iraqi oil flows in coming weeks, the remaining Opec nations would step in to support supplies.

AFP in New York reported global oil prices had rallied sharply on Thursday, more than $US2 for West Texas Intermediate (WTI) and $US3 for Brent crude, as Sunni militants pushed towards Baghdad and forces from Iraq's autonomous Kurdish region took control of the northern oil hub of Kirkuk.

Research from Craigs Investment Partners said last week's oil high, with Brent crude up 4% to $US113 a barrel and WTI hitting $US107, were the highest levels since September.

While some northern oilfields had already been shut off, the key concern was that there would be disruptions to the major production areas in the south, should the insurgents get that far.

''So far, the effect of all of this is expected to be minor, unless the situation escalates,'' the Craigs research said.

It was unlikely higher oil prices would cause any material dent to economic activity unless prices for Brent oil rose to $US125 a barrel.

The International Energy Agency told AFP that oil supplies from Iraq might not be at immediate risk.

It pointed out Iraq's relatively small output from the north had been off the market since March due to violence, while output from the south had been on the rise and production had hit a 30-year high.

However, the IEA pointed to the long-term importance of Iraq for the global energy market.

''Roughly 60% of the growth in Opec crude production capacity for the rest of this decade will come from Iraq,'' it said.

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