Sun, Jun 15, 2014 - Page 15 News List

Iraq violence sends oil prices to a nine-month high


Oil hit a nine-month peak this week as unrest erupted in key OPEC crude producer Iraq, while haven-investment gold struck a multiweek high as many investors sought safety.

The Iraqi government bolstered Baghdad’s defenses on Friday, as jihadists pushed toward the capital and US President Barack Obama said he was examining options short of sending ground troops to help Baghdad counter the Sunni extremist offensive.

OIL: Brent prices leapt to US$114.69, touching the highest level since September last year, as traders eyed worsening violence in key OPEC crude exporter Iraq.

“Prices are still being driven up by the events in Iraq, where militants from the Sunni terrorist group ISIL [Islamic State of Iraq and the Levant] have seized further territory and are now said to be just a few kilometers away from the capital, Baghdad,” Commerzbank analyst Carsten Fritsch said.

The International Energy Agency said that oil supplies from Iraq may not be at immediate risk.

“Concerning as the latest events in Iraq may be, they might not for now, if the conflict does not spread further, put additional Iraqi oil supplies immediately at risk,” the Paris-based agency said in its monthly report.

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

The 12-nation OPEC, which pumps one-third of the world’s crude, decided on Wednesday in Vienna to hold their collective production target at 30 million barrels per day (bpd), where it has stood since late 2011, as they said the oil market was stable.

OPEC nations have expressed their satisfaction with prices above US$100 a barrel — where they have been for most of this year — as it brings them in sufficient revenue, while appearing not to crimp growth in consuming nations.

By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in July leapt to US$113.29 a barrel from US$108.77 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for July soared to US$106.64 a barrel compared with US$102.73 a week earlier.

PRECIOUS METALS: Gold hit a two-and-a-half-week peak at US$1,277.65 per ounce, as investors sought a safe-haven investment to shelter from Iraq woes.

“Demand for safe haven assets made a comeback after events in Iraq,” Capital Spreads analyst Jonathan Sudaria said.

Gold is traditionally viewed as a safe store of value in times of geopolitical uncertainty and unrest.

On the downside, palladium and platinum sank on news of a breakthrough deal to end strikes in key producer South Africa.

“Platinum and palladium ... were still falling after unions agreed on a wage deal for miners in South Africa,” CMC Markets analyst Jasper Lawler said.

South Africa’s radical AMCU union said on Friday it had agreed in principle to a deal to end the country’s longest mining strike, which has crippled the world’s largest platinum producers.

“In principle we have agreed to the offer,” Joseph Mathunjwa, the leader of the Association of Mineworkers and Construction Union, told the SAPA news agency.

“There are still issues that we need to consult with the employer,” the agency quoted him as saying.

By Friday on the London Bullion Market, the price of gold gained to US$1,273 an ounce from US$1,247.50 a week earlier.

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