Oil prices rise on fears of a long war
Oil prices leapt by more than a dollar today before falling back as fears of a protracted war in Iraq remained at the forefront of traders’ minds.
Dealers are concerned that a longer, drawn-out war in the Middle East will hamper world oil supplies.
Today the benchmark price of Brent crude shot up 1.16 dollars before slipping back to 26.25 dollars a barrel, a 40 cent rise.
The effect on confidence has not been restricted to the oil markets. London’s benchmark FTSE 100 Index of leading shares was also off the boil today, closing 64 points down at 3729.1.
Oil prices have been extremely volatile in the run-up to the start of hostilities, with the onset of fighting in Iraq hitting supply in the world market place.
This has combined with ethnic unrest in some oil-producing regions of Nigeria which has led to around 1% of global supplies being taken out of the market.
The commander of UK forces in the Gulf was today reported as saying it would take three months for oil exports to resume from Iraq’s southern oil fields, longer than some analysts had predicted.
Iraq’s exports of about 1.8 million barrels of oil a day have trickled to a stop since the US-led invasion began a week ago.
But while oil prices have climbed significantly, they remain below the 12-year highs of almost 40 dollars a barrel reached before the bombs started to drop.
That rapid rise was blamed on fears among traders that the battle could spread outside Iraq and constrict oil supplies from other producers in the region.
During the Gulf War in 1991, oil prices hit a high of 41 dollars and analysts believe this could be matched again this time.
But while analysts now seem confident that the war will be contained within Iraq, the world’s seventh-largest oil supplier, others fear invasion will spark turmoil in the Middle East, which supplies two-fifths of globally-traded crude
Higher crude oil prices have a knock-on effect on the wider economy, pushing up prices for petrol, heating oil and other fuels which in turn raise the cost of energy and transport for households, industry and motorists.
