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

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.

By ·

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

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 [email protected]

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!

Article Topics

Energy · Oil Prices · All Topics
Latest Whitepaper
Reduce Order Processing Costs by 80%
Sales order automation software will seamlessly transform inbound emailed and printed purchase orders into electronic sales orders that can be automatically processed into your ERP system with 100% accuracy.
Download Today!
From the June 2016 Issue
In the wildly unstable ocean cargo carrier arena, three major consortia are fighting for market share, with some players simply hanging on for survival. Meanwhile, shippers may expect deployment shifts as a consequence of the Panama Canal expansion.
WMS Update: What do we need to run a WMS?
Supply Chain Software Convergence: Synchronization Realized
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Optimizing Global Transportation: How NVOCCs Can Use Technology to Operate More Profitably
Global transportation isn't getting any easier to manage, especially for non-vessel operating common carriers (NVOCCs). Faced with uncertainties like surcharges—but needing to remain competitive when bidding against other providers—NVOCCs need the right mix of historical data, data intelligence, and technology support to make quick and effective decisions. During this webcast you'll learn how Bolloré Transport & Logistics was able to streamline its global logistics and automate contract management.
Register Today!
EDITORS' PICKS
Top 50 U.S. and Global 3PLs 2016: Technology Now the Key Differentiator
Following last year’s merger and acquisition frenzy, the speed of technology implementation by the...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo