Oil prices shoot up on Iraq turmoil

The impact of escalating tension in Iraq spilled over to energy markets, pushing crude oil prices to a 10-month high on Friday. Benchmark brent crude oil prices surpassed $114 per barrel as the government in oil-producing Iraq continued to lose hold over cities in a growing sectarian conflict. Iraq has been producing nearly 3.5 million barrels of oil a day this year. This is equivalent to 11% of the total production of Organisation of the Petroleum Exporting Countries (Opec) and 3.5% of the total global production.

The surge in oil prices can be attributed to two main factors. First, there is a possibility of disruption in supply if the sectarian conflict spreads to the southern part of Iraq. Second, the continued sectarian violence highlights the risks to oil supply from Iraq.

The extent to which the other large oil producers in the region such as Saudi Arabia, Kuwait and the United Arab Emirates will able to fi ll the gap from their spare capacity remains to be seen.