Crude Prices Rise on Iraq/Kurd Conflict, but Market Impact Will Be Short Lived: Analysts

One expert says the conflict isn't enough to push oil to $60. File Image / Pixabay

Geo-political strife is one of the factors that analysts of late have cited as a potential driver of crude price escalation, and on Monday oil climbed to a two week high as troops in Iraq captured a Kurdish-run refinery, a gas plant, and other facilities, disrupting supplies in a region that pumps up to 600,000 barrels per day (bpd).

West Texas Intermediate rose 42 cents to settle at $51.87 per barrel, while Brent increased 65 cents to end the session at $57.82.

Michael Lynch, president of Strategic Energy & Economic Research, said, "The reports out of Iraq are the driving force; it is undoubted that the market psychology is affected."

However, in taking the long view, some experts think the latest wave of geo-political upheavals may not be the market catalyst once predicted.

Jason Gammel, equity research analyst at Jefferies, told Bloomberg television, pointed out that if the Iraq/Kurd conflict results in the 600,000 bpd being removed from the market, "it would be a supply shock" - but a short-term one, and not one that would propel prices to $60 per barrel, as the Bloomberg interviewer suggested.

Essam al-Marzouq, oil minister for Kuwait, told media there are no signs of oil supply disruptions resulting from the Iraq/Kurd clash, nor has there been any discernible fallout from the U.S.'s bid last week to decertify the nuclear deal with Iran.

Unsurprisingly, Bijan Zanganeh, oil minister for Iran, also downplayed the U.S. initiative by stating that President Donald Trump's hard line stance will not have much impact on global oil prices.

Last week, Scott Darling, head of regional oil and gas at JPMorgan, said Trump's initiative will have significant impact on the oil market, and he predicted that Brent to drop to $47 in 2018.