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MENDOZA IN THE NEWS

Assaults on Iraqi oil fields sow worry over global gas prices.

Publication: PBS Newshour

June 26, 2014


The following is an excerpt from a PBS Newshour interview of Gianna Bern, the academic director of the Master of Science in Finance program and an associate teaching professor of Finance, on the impact of the turmoil in Iraq on oil prices. To read the transcript of the entire interview visit: Assaults on Iraqi oil fields sow worry over global gas prices.


GWEN IFILL: As Iraq continues to fracture, there are new concerns about the security of its considerable oil production facilities. Only last month, the country’s crude oil production reached 3.6 million barrels a day, the most since Saddam Hussein took over in 1979. That made Iraq the seventh largest producer in the world.

Fighting at Iraq’s biggest oil refinery has raged for a week, with the government army battling fighters from ISIL, the Islamic State in Iraq and the Levant. Both sides have claimed to have the upper hand at Baiji, located about 130 miles north of Baghdad.

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GIANNA BERN, Brookshire Advisory and Research: Well, the vast majority of Iraq’s production is intended for export.

As you just mentioned in your — just a minute earlier, Iraq’s production has reached about 3.3 million barrels per day, and it’s come a long way from where its production was several years ago. So the vast majority of it is meant, I would say a good 3.3 million barrels, for export, most of which is coming out of the southern parts of the country.

GWEN IFILL: OK. So where is that going? Let me stay with you for a moment. Where is that going? It’s coming from the southern part and going to — not to the U.S. Where’s it going?

GIANNA BERN: Asian — Asian markets are big — big importers, so China, Japan, Korea. Your Asian markets are very significant. European markets are likely to be impacted should this spread further.

I think the important thing to mention right now is that where it’s at and where crude oil prices are at today, the market has really contained this impact. So the market has absorbed all of this information, all of this activity, and really the market hasn’t reacted the way we might have thought several years ago, and — which is a good thing, so — but it’s important to note that here the activity and the fighting has not reached some critical areas.

So, for now, it’s wait and see. And the market has digested all of this information pretty nicely in fact. Crude oil prices — and I think the important one to keep in mind here is the Brent. Brent prices closed about $113 per barrel today. So WTI closed at about $106 per barrel today. So Brent is much more likely to be impacted by any activity in Iraq.