Will Isis Affect Oil Prices?

Brent crude oil experienced a mini spike after the attacks on the Baiji oil refinery in northern Iraq, the country’s largest, by the Islamic State of Iraq and Syria

Coutts 1 July, 2014 | 4:01PM
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This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Alan Higgins, Chief Investment Officer, UK at Coutts discusses how Middle Eastern tensions may affect the oil price.

The Brent crude oil price experienced a mini spike after the attacks on the Baiji oil refinery in northern Iraq, the country’s largest, by the Islamic State of Iraq and Syria (Isis). But Brent remains below the highs reached last September during supply disruptions in key producing countries Libya, Nigeria and Iraq. Though the situation in Iraq remains uncertain, Brent has since eased back to around $115 per barrel and the immediate impact on the global economy looks limited.

With about 90% of the country’s oil production being based in southern Iraq, an Isis intrusion in that direction would cause more uncertainty. However, we note that in recent cases of internal turmoil in oil-producing nations, such as Egypt and Libya, oil production resumed its flow after a brief interruption, and therefore it’s understandable that the market remains fairly sanguine about the current situation in Iraq.

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