Iraq oilfield threat pushes prices up
Oil prices spiralled towards the $50 mark today as concerns over supplies intensified after violence flared in Iraq.
Anxiety mounted among traders after militants in the strife-torn country threatened to set oilfields alight in retaliation for a US assault in the city of Najaf.
The price of a barrel of crude oil surged to a record high of $48.98 before easing back slightly.
Fears of supply disruptions and their potential impact on the global recovery drove major world stock markets into the red.
The FTSE 100 Index has added more than 50 points this week but retreated today, following the lead of the Dow Jones Industrial Average, which closed down 42 points overnight.
London trader Matthew Buckland said: “There’s now a real risk that we could hit 50 US dollars in the near term and at these levels, equity markets may become uncomfortable.”
Spirits on the trading floor have been depressed by the fact that Opec is pumping oil at close to full capacity.
Repeated attempts to restrain the price surge have failed – Saudi Arabia said last week that it was able to pump an extra 1.3 million barrels a day.
The rise in oil prices today was sparked by Shiite militants breaking into the headquarters of Iraq’s South Oil Co in Basra and setting the company’s warehouses and offices ablaze.
The seriousness of the attack is underlined by the fact that 80% of oil exports from Iraq leave Basra.
The violence came just hours after Iraqi oil minister Thamer al-Ghadhban said the country was prepared to resume pumping its capacity of 1.7 million barrels per day. This is up from current levels of about 1 million a day.
Potential disruptions to the flow of oil from the Middle East come at a time of strong demand in China and the United States and supply concerns in Russia and Venezuela.
James Steel, director of commodities and oil research at New York-based brokers Refco, said: “The market has been able to accommodate a supply disruption from one source.
“But what makes oil prices jittery is when you have the possibility of disruptions from several sources at once.”
The rise in prices of crude has heaped pressure on UK exporters and airlines such as British Airways, which more than doubled its fuel surcharge this month.
