According to Philip Lewis, analyst with BZW Australia Ltd, the Iraqi attacks on Kurds and the United States (US) counter attacks will encourage the Organisation of Petroleum Exporting Countries (Opec) to put off hard decisions on oil prices.
The Opec cartel needed to re-align quotas in June but the painful exercise was averted due to tight oil markets and high prices.
Opec would have had to try again this month to re-align quotas but events in Iraq will deliver the cartel another excuse to do nothing, the analysts in his update Overnight Commodities News has indicated.
Once the market settles down, Organisation of Petroleum ExportingCountries will have difficult time to deal with excess supply of oil.
Should military involvement escalate to the point of installing a new political regime in Iraq, then oil flows could be accelerated. Conversely, a deepening imbroglio could keep Iraq sidelined for a long while yet, the update news said.
Lewis observes that the growing concern in the Gulf will encourage investments in non-Gulf producing areas. He feels in the short term, the flow-on implications could add weight to our expectations for a correction in oil prices into 1997.The Gulf events, however, and low distillate stocks are the drivers of the current high oil prices. Both the issues are transitory and ample crude stocks should allow the distillate stocks to accelerate over the next few months.
