- Violence in Baghdad could lead to a million barrels a day of Iraqi oil being taken off the market, RBC’s Helima Croft said.
- Protests haven’t impacted oil prices yet, but they could if protestors enter production facilities.
- If Iraq’s supply is taken off the market, it will be factor worsening the global energy crisis.
Recent violent protests in Iraq could lead to a million barrels per day of Iraqi oil being taken off the market, RBC commodities chief Helima Croft said on Tuesday, warning that energy markets could be impacted if protests continue to escalate.
Protests began after Muqtada al-Sadr, an influential Shia leader in Iraq, announced he would be exiting politics, causing Sadr’s supporters to invoke violence in Iraq’s capital, Reuters reported. It adds another incident of unrest in the Middle East, where protests are also rocking Libya.
Those events haven’t had too much of an impact on oil prices yet, Croft said, but they could soon, particularly if protests spread to production facilities.
“We haven’t had any physical supply disruptions yet from Iraq,” Croft said in an interview with CNBC. “But we will closely watch to see in the coming days: do we see protestors entering facilities? Do we potentially see one million barrels [a day] of Iraqi production come offline?”
A million barrels a day from Iraq taken off the market would have a major impact on the global supply situation, considering Iraq is OPEC’s second-largest oil producer after Saudi Arabia.
“Anything that would impact Iraqi production would be very material for the market,” Croft added, although she didn’t specify what sort of impact on prices she would expect to see.
The impact would likely be high, though, as countries are still scrambling to build up energy reserves in time for winter. The European Union ban on Russian oil is expected to fully kick-in by year end and Russia has hinted at a possible cutoff of natural gas this winter. The key Nord Stream 1 pipeline will be shuttered for three days starting Wednesday, though observers fear it could be shut off indefinitely in retaliation for sanctions.