LadyMod at scam.com
10-17-2007, 08:48 AM
Iraq War Fallout Fuels Oil's Surge (http://online.wsj.com/article/SB119257829206261267.html?mod=googlenews_wsj)
Fear of Turkish Invasion Roils Market Already Hit
By Loss of Crude Supply
By CHIP CUMMINS and RUSSELL GOLD
October 17, 2007; Page A3
Oil prices set record highs for the third straight trading day as tensions ramped up in Iraq, in the latest sign that the messy aftermath of the U.S.-led invasion four years ago continues to haunt petroleum markets.
Fears that Turkey might invade the Kurdish area of Iraq sent crude-oil futures prices climbing $1.48 to $87.61 on the New York Mercantile Exchange, an exchange record, though oil remains shy of the inflation-adjusted record of more than $101 a barrel set in April 1980. While any military action is unlikely to disrupt oil supplies, the threat adds to regional destabilization amid the tightest oil market in a generation, when even small disruptions can cause big price moves. (Related articles on pages A5 and C11)
• The Record: Crude oil prices set a nominal record on commodity futures markets as tensions mounted between Iraq and Turkey. Adjusted for inflation, however, yesterday's mark is still below the inflation-adjusted 1980 record of $101 a barrel.
• The Impact: The Iraq war and its aftermath now represent the largest single oil-supply disruption since World War II and have helped drive up crude-oil prices.
• The Outlook: Few believe Iraq will return to its peak prewar level of 2.5 million barrels a day anytime soon. Iraq lacks both adequate security and a legal framework for oil-exploration contracts.
The outlook for improving Iraqi production remains troubled, as domestic problems continue, Iraqi lawmakers keep arguing about national energy policy and tensions ratchet up along its borders. The International Energy Agency, a watchdog for the world's most industrialized economies, assumes Iraq's production capacity will remain roughly flat at 2.4 million barrels a day through 2012 but says it is one of four countries where the group says it is too difficult to hazard a guess. Venezuela, Indonesia and Nigeria are the other three.
"While there was considerable potential to expand output, it would be impossible to make a thorough assessment until the security situation improved and we have a legal framework in place that enabled external investment," says Lawrence Eagles, the IEA's head of market analysis.
The Iraqi invasion and aftermath now rank as the biggest, cumulative oil-supply disruption since World War II, surpassing other big interruptions such as the first Gulf War, the 1979 Iranian revolution, and the nationalization of Iranian fields in the 1950s, according to a list of historical disruptions compiled by the Energy Department.
Iraq has the world's third-largest reserves of crude oil, behind Saudi Arabia and Iran, but doesn't rank among the world's top 10 oil producers, according to the BP Statistical Review, an industry bible.
http://online.wsj.com/public/resources/images/NA-AO269_IraqOi_20071016191641.gif
During the past four years, the loss of Iraqi crude has been a major factor in the run-up in oil prices. Iraq oil production reached about 2.5 million barrels a day. It recovered to near pre-invasion levels in 2004 but sunk again as the insurgency in Iraq heated up. Currently, it runs at about two million barrels a day.
The Iraq situation is contributing to overall higher risk in the Middle East, home of two-thirds of the world's oil reserves. Tensions have mounted between the U.S. and Iran, which Western nations have accused of trying to develop a nuclear weapon under the guise of a civilian nuclear program. Iran, which disputes the accusation, produces 3.9 million barrels a day, making it the world's fourth-largest oil producer. Iranian officials, meanwhile, have from time to time threatened to block the Strait of Hormuz or disrupt oil flows out of the Persian Gulf.
The tensions come as developing economies such as China's and India's gobble up more fuel. Major Western oil companies are having trouble snaring fresh reserves. Some of the world's biggest existing oil fields are posting big production declines.
"The substantial reduction of Iraqi oil has clearly affected world oil supply and made markets tighter," says J. Robinson West, chairman of oil consulting firm PFC Energy. The loss of Iraqi oil has helped shrink the world's spare crude oil production capacity to its lowest level in decades.
In April 2003, less than a month after U.S. troops entered the country to topple Saddam Hussein, Vice President Dick Cheney predicted Iraq's oil output would rise quickly. But looting and internal squabbles slowed work. Rising violence drove many of Iraq's best oil technocrats out of the country.
Iraq raised production back to near pre-war levels by 2004. But when the insurgency gained strength, output fell again. Iraq's two oil-export terminals in the Persian Gulf are among the most fortified facilities in the world, encircled by metal fencing, machine-gun wielding troops and a high-tech armada. In 2004, Iraqi and American forces narrowly thwarted an attack by explosive-laden speedboats.
Meanwhile, successive Iraqi governments that followed have failed to hammer out lasting petroleum legislation. That has prevented big, international oil companies from investing in Iraq and signing deals to repair oil fields or drill new ones. Early this year, Iraqi lawmakers appeared to be near a deal until squabbling between Baghdad's Shiite-led government and officials in the semiautonomous Kurdish north torpedoed it. The Kurds eventually passed their own regional oil law and are signing legally ambiguous deals, including one recently with Hunt Oil Co. of Dallas.
.
Fear of Turkish Invasion Roils Market Already Hit
By Loss of Crude Supply
By CHIP CUMMINS and RUSSELL GOLD
October 17, 2007; Page A3
Oil prices set record highs for the third straight trading day as tensions ramped up in Iraq, in the latest sign that the messy aftermath of the U.S.-led invasion four years ago continues to haunt petroleum markets.
Fears that Turkey might invade the Kurdish area of Iraq sent crude-oil futures prices climbing $1.48 to $87.61 on the New York Mercantile Exchange, an exchange record, though oil remains shy of the inflation-adjusted record of more than $101 a barrel set in April 1980. While any military action is unlikely to disrupt oil supplies, the threat adds to regional destabilization amid the tightest oil market in a generation, when even small disruptions can cause big price moves. (Related articles on pages A5 and C11)
• The Record: Crude oil prices set a nominal record on commodity futures markets as tensions mounted between Iraq and Turkey. Adjusted for inflation, however, yesterday's mark is still below the inflation-adjusted 1980 record of $101 a barrel.
• The Impact: The Iraq war and its aftermath now represent the largest single oil-supply disruption since World War II and have helped drive up crude-oil prices.
• The Outlook: Few believe Iraq will return to its peak prewar level of 2.5 million barrels a day anytime soon. Iraq lacks both adequate security and a legal framework for oil-exploration contracts.
The outlook for improving Iraqi production remains troubled, as domestic problems continue, Iraqi lawmakers keep arguing about national energy policy and tensions ratchet up along its borders. The International Energy Agency, a watchdog for the world's most industrialized economies, assumes Iraq's production capacity will remain roughly flat at 2.4 million barrels a day through 2012 but says it is one of four countries where the group says it is too difficult to hazard a guess. Venezuela, Indonesia and Nigeria are the other three.
"While there was considerable potential to expand output, it would be impossible to make a thorough assessment until the security situation improved and we have a legal framework in place that enabled external investment," says Lawrence Eagles, the IEA's head of market analysis.
The Iraqi invasion and aftermath now rank as the biggest, cumulative oil-supply disruption since World War II, surpassing other big interruptions such as the first Gulf War, the 1979 Iranian revolution, and the nationalization of Iranian fields in the 1950s, according to a list of historical disruptions compiled by the Energy Department.
Iraq has the world's third-largest reserves of crude oil, behind Saudi Arabia and Iran, but doesn't rank among the world's top 10 oil producers, according to the BP Statistical Review, an industry bible.
http://online.wsj.com/public/resources/images/NA-AO269_IraqOi_20071016191641.gif
During the past four years, the loss of Iraqi crude has been a major factor in the run-up in oil prices. Iraq oil production reached about 2.5 million barrels a day. It recovered to near pre-invasion levels in 2004 but sunk again as the insurgency in Iraq heated up. Currently, it runs at about two million barrels a day.
The Iraq situation is contributing to overall higher risk in the Middle East, home of two-thirds of the world's oil reserves. Tensions have mounted between the U.S. and Iran, which Western nations have accused of trying to develop a nuclear weapon under the guise of a civilian nuclear program. Iran, which disputes the accusation, produces 3.9 million barrels a day, making it the world's fourth-largest oil producer. Iranian officials, meanwhile, have from time to time threatened to block the Strait of Hormuz or disrupt oil flows out of the Persian Gulf.
The tensions come as developing economies such as China's and India's gobble up more fuel. Major Western oil companies are having trouble snaring fresh reserves. Some of the world's biggest existing oil fields are posting big production declines.
"The substantial reduction of Iraqi oil has clearly affected world oil supply and made markets tighter," says J. Robinson West, chairman of oil consulting firm PFC Energy. The loss of Iraqi oil has helped shrink the world's spare crude oil production capacity to its lowest level in decades.
In April 2003, less than a month after U.S. troops entered the country to topple Saddam Hussein, Vice President Dick Cheney predicted Iraq's oil output would rise quickly. But looting and internal squabbles slowed work. Rising violence drove many of Iraq's best oil technocrats out of the country.
Iraq raised production back to near pre-war levels by 2004. But when the insurgency gained strength, output fell again. Iraq's two oil-export terminals in the Persian Gulf are among the most fortified facilities in the world, encircled by metal fencing, machine-gun wielding troops and a high-tech armada. In 2004, Iraqi and American forces narrowly thwarted an attack by explosive-laden speedboats.
Meanwhile, successive Iraqi governments that followed have failed to hammer out lasting petroleum legislation. That has prevented big, international oil companies from investing in Iraq and signing deals to repair oil fields or drill new ones. Early this year, Iraqi lawmakers appeared to be near a deal until squabbling between Baghdad's Shiite-led government and officials in the semiautonomous Kurdish north torpedoed it. The Kurds eventually passed their own regional oil law and are signing legally ambiguous deals, including one recently with Hunt Oil Co. of Dallas.
.