OIL SHOCK

The oil price could spike to $150 per barrel briefly if the conflict in Iraq hits operations in the country’s major southern oil fields, Société Générale (SocGen) has warned.

A report by the bank noted that this kind of supply shock could affect up to 2.6 million barrels per day of Iraqi oil exports, CNBC reported.

A disruption of this scale could then spark a co-ordinated release of strategic oil reserves by member states of the International Energy Agency, although SocGen acknowledged this was an unlikely event. Meanwhile, Saudi Arabia could also put more oil onto the market to mitigate the impact on the global economy.

‘In this extreme case, however, the spike would not last very long, probably not more than one quarter, probably less,’ said Michael Wittner, global head of oil research at SocGen.

A more likely scenario in his view would be what the report described as an ‘extended de facto sectarian civil war’ in Iraq lasting one to two years, which would lead to less extreme supply disruptions of up to 500,000 barrels per day.