More than a few petroleum analysts are predicting that per barrel oil prices will firm to more than $ 20 in the last four months of this year, instead of trading in the $ 18- $ 19 range.
Predicted Petroleum Finance Co director Fareed Mohamedi: Tighter supplies due to the loss of Iraqi exports are likely to raise the trading range to around $ 21 - $ 23.50 per barrel during the last four months of 1996. Iraqi oil was set to flow this year under a long-negotiated oil-for-food deal. The terms of the deal, negotiated under United Nation auspices, allowed Iraq to sell $ 2 billion worth oil every 90 days in exchange for food and other humanitarian supplies. The agreement has been indefinitely frozen following Iraq's seizure of the Kurdish city of Irbil. UN officials suspended the deal, stating that it was no longer safe to post international observers in the region.Global oil traders, who had expected the deal to be finalised since early this year, had long discounted the impact of the entry of Iraqi oil.
But with Iraq's estimated 750,000 barrels per day (bpd) no longer available, oil analysts were scrambling to revise price forecasts upwards. Iraq would have supplied about one per cent of the total global demand. Petroleum experts do not expect the shortfall to be made up by other oil- producers in the near future. There will be no increase without an OPEC agreement. So, no additional oil will be instantly available, Petroleum Industry Research Foundation chief John Lichtblau said. The Petroleum Finance Co forecasts that the initial impact of the lack of Iraqi oil will be felt in the Mediterranean and will later affect the oil flows into Asia.
A number of companies had reportedly finalised contracts for buying Iraqi oil.
Ironically, the oil-for-food deal was probably one factor in Iraqi President Saddam Hussein's decision to move into internationally-protected Kurdish territory. Irbil was slated to be a key nodal point in receiving the revenue from the sale of oil.
Irbil, however, was increasingly being controlled by the Iran-sponsored PUK faction. With his military strike into the region, the Iraqi president has now ensured that a rival faction, sponsored by Baghdad, will control Irbil.
There are unconfirmed reports that PUK leaders were shot dead soon after the Iraqi convoys arrived in the city.