Oil prices spike as Islamists march on Baghdad

Oil prices spike as Islamists march on Baghdad

Escalation of violence in Iraq, OPEC's second-largest producer of oil, could send crude skyrocketing and trigger another recession

An oilfield (illustrative photo: AP/Manu Brabo)
An oilfield (illustrative photo: AP/Manu Brabo)

Crude prices on Friday extended the previous day’s rally to sit at nine-month highs after militants closed in on Iraq’s capital, Baghdad, fueling fears over supplies from the major crude producer.

US benchmark, West Texas Intermediate, advanced 73 cents to $107.26 in late-morning trade after surging $2.13 in New York on Thursday to reach its highest level since September.

Brent North Sea crude gained 57 cents to $113.59 per barrel after shooting up $3.07 in London.

Iraq is the second-biggest producer in the OPEC oil cartel after Saudi Arabia and any escalation of the violence there could hit supplies, sending prices higher, analysts said.

The Islamist militants who captured Iraq’s second-largest city, Mosul, earlier this week have made a grab for some of the country’s largest oilfields as well.

“Any disruption at OPEC’s second-largest producer risks tearing apart the global rebound we had seen this year,” Desmond Chua, market analyst at CMC Markets in Singapore, said in a note.

Phillip Futures warned that “higher energy prices will apply brakes on a global recovery and may even cause the world to reenter recession.”

US President Barack Obama has said his national security team “is looking at all the options” to help the Iraqi government.

Iraq, which has the world’s fifth-largest proven reserves, pumps an average of about 3.5 million barrels of oil a day.

On Wednesday, the Organization of Petroleum Exporting Countries, meeting in Vienna, maintained its output ceiling where it has been since late 2011. Saudi Oil Minister Ali al-Naimi expressed satisfaction with a relatively stable oil market.

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