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Oil prices rise on Ukraine, Iraq fears

Monday, August 11 15:30:21

Brent crude oil strengthened above $105 a barrel today as a political showdown in Iraq and a warning from NATO of a probable Russian invasion of eastern Ukraine underscored political risks.

Iraq's president asked the Shi'ite coalition's nominee for prime minister to form a government, challenging incumbent Nuri al-Maliki who has vowed to seek a third term.

Maliki has come under increasing pressure to step aside, but is expected to resist the move.

NATO chief Anders Fogh Rasmussen told Reuters in an interview he saw a "high probability" that Russia could intervene militarily in eastern Ukraine and that NATO saw no sign that Moscow was pulling back its forces from close to the border.

Brent was up 25 cents at $105.27 a barrel by 1420 GMT. The contract jumped more than $1 to hit a weekly high of $106.85 on Friday before settling 42 cents lower.

U.S. crude was up 80 cents to $98.45 a barrel.

"There's talk of changes in Baghdad. The oil market is sort of waiting to see what happens," said Simon Wardell, analyst at Global Insight.

Oil jumped sharply at the end of last week as Islamic State fighters made rapid gains in parts of northern Iraq and came within striking distance of more of the country's oilfields.

Yet oil exports from southern Iraq are near record levels and the Kurdistan Regional Government's (KRG) oil pipeline via Turkey is operating normally and pumping 120,000 barrels per day (bpd) of crude oil.

"The market has become more complacent about supply again," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. "But complacency is dangerous. Given the geopolitical tensions, a spike in oil prices cannot and should not be ruled out."

Oil markets are well supplied in most parts of the world, and North Sea crude oil for immediate delivery is trading at a discount of $1 to $2 below the Brent futures front month.

Prompt Brent prices are unlikely to move higher unless there's a significant disruption in supply, analysts argue, although prices have risen in the future months on concerns about future output growth. (Reuters)

For more visit: www.businessworld.ie