Oil prices soared on Monday, but pared gains anticipation that major oil producing regions in Iraq remained unaffected by from the conflict that’s spreading across the northern region of the country. Crude for July settlement added 6 cents or 0.1% to trade at $106.97 per barrel.
Last week, prices increased 4.1%, the most impressive weekly gain since the week ended December 6. August-delivery Brent crude, the European benchmark, soared 48 cents or 0.4% to exchange at $112.94 per barrel after increasing about 4% last week.
Chaos in Iraq spread over the weekend, with Sunni-led militants posting photos of hundreds of Iraqi Shiite soldiers they executed. Last week, the rebels who are led by the Islamic State in Iraq and the Levant or ISIS, captured Mosul, a town in Northern Iraq and progressively closed in on the capital. ISIS has declared it intends to implement a strictly Islamic order in Iraq.
Iraq has not sold any oil from north region into the international market since March, because of violent interruptions of supplies to Turkey, with the latest events threatening to delay resumption of exports. Most of oil shipments from Iraq come from its southern region, according to MarketWtach.
Natural gas contracts also increased, with the July gas going up 3.6 cents or 0.8% to $4.775 per million British thermal units, after Russia halted natural gas shipments to Ukraine. Russian gas giant OAO Gazprom declared on Monday that shipments to Ukraine will only resume on advance payment.
“The market is going to be whipsawed by headlines from Iraq. If there’s shooting on the streets of Baghdad, we’ll get a spike in prices, but I don’t see WTI passing $120,” Michael Lynch of Winchester, Massachusetts-based Strategic Energy & Economic Research in Winchester told Bloomberg.
Goldman analysts believe that a substantial hike in crude prices will be experienced if violence reaches southern parts of Iraq.
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