Subscribe to our free, weekly email newsletter!


Intensifying Iraqi turmoil poses another threat to supply in tight global oil market

By Patrick Burnson, Executive Editor
June 23, 2014

IHS Energy experts say oil markets have turned their attention squarely to Iraq and the fast-moving attacks of the Islamic State in Iraq and Syria (ISIS). The impact on global supply chains has yet to be measured.

Global oil prices have increased by several dollars per barrel in the past few days, with Brent front-month futures rising above $114 in intra-day trading late last week. Prices will remain elevated during this crisis, all else equal.

So far, the ISIS offensive has been largely confined to the north and west of Iraq—still some distance away from the epicenter of the country’s oil production in the south.
Derik Andreoli, Ph.D.c., a senior analyst at Mercator International LLC, says time will tell how this spells out for supply chain managers.

“It all depends on how long the prices remain elevated,” he says. “But in general, elevated oil prices push through to elevated bunker prices.”

The increasing potential for supply outages in Iraq comes against a backdrop of an already tight global market,” says IHS.  OPEC spare capacity is currently at the lower end of the market’s comfort zone of 2.5- to 4.5 million barrels per day (mbd) as market balancers Saudi Arabia, Kuwait, and the United Arab Emirates continue producing at high levels in part to offset some 3.5 mbd of supply offline globally.

The global balance is expected to tighten this summer as demand picks up seasonally.
Energy analysts say further global oil price increases could spur discussions of releasing oil from strategic reserves. New supply outages in Iraq would likely push global oil prices higher still—possibly toward $120, a level that could trigger discussions among consuming countries of tapping strategic stocks.

About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Phoenix-based Knight Transportation, one of the top and most profitable truckload companies said this week it has acquired Barr-Nunn Transportation, a dry van truckload carrier based near Des Moines, Iowa.

A weak fourth quarter growth forecast is on the horizon for ocean container volumes in Northern Europe, according to the most recent edition of the Global Port Tracker report from maritime consultancy Hackett Associates and Institute of Shipping Economics and Logistics.

3PL makes its first acquisition in its 85-year history with purchase of the Southeast and Northeast regional hubs of Bloomington, Indiana-based 3PL Nexus Distribution Corporation.

Jacksonville, Fla.-based Florida East Coast Railway (FECR), a 351-mile freight rail system on the state’s east coast, recently made two separate announcements. One had to do with an expansion of intermodal services between Charlotte, N.C. and various locations in South Florida and another was related to the company boosting its intermodal capacity through the addition of new equipment.

The International Air Transport Association (IATA) announced August 2014 data for global air freight markets showing continued “robust”growth in air cargo volumes.

Article Topics

News · Energy · Oil Prices · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA