Oil ascended, registering the biggest gain in one week this year, as violence in Iraq raised fears of return to civil war.
West Texas Intermediate crude added 0.4%, after jumping 2% on Thursday.
Government forces in Iraq, which produces most oil in the OPEC, have moved to defeat Islamist militants who have entered cities north of Baghdad after overpowering troops in Mosul this week.
“The upsurge of violence in Iraq has raised additional risk of supply disruption. The situation in Iraq is going to continue to guide the market for a while,” analyst Gene McGillan of Stamford, Connecticut-based Traditional Energy told Bloomberg.
As the escalating unrest in Iraq propels crude oil prices higher, a report released on Friday forecasts that demand of the product will increase on a global scale, although Iraq’s shipments may not be at immediate risk of interruption.
“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 International Energy Agency stated in its monthly report on developments in the oil market.
The EIA, which carries out independent energy research and projections for 29 member countries, said that most of the conflict has affected northern regions, which have not been producing much oil since March. Most of the country’s oil output, which has hit a level last registered 30 years ago, has occurred in southern areas. Shipments are coming from source near Basra.
“While Iraq’s production potential is huge, so are the political hurdles it is facing,” the EIA is quoted by USA Today as saying.
The chaos in Iraq has caused global oil prices to rise to around 4% this week. International benchmark Brent ascended 31 cents to $113.41 on Friday.
The EIA projects that Iraq will account for 60% of OPEC’s oil output for the remainder of this decade.
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