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Amid Iraq turmoil, oil producers hold their breath

World oil producers were cautiously watching Iraq on Tuesday as militants moved in on Baghdad, but stressed that the country’s crude supplies were safe — for now at least.

Militants have pushed a weeklong offensive that has overrun swathes of Iraq to within 60 kilometres (40 miles) of Baghdad on Tuesday, as the UN warned that the country’s very existence was under threat.

Risks of disruption to Iraq’s oil output will remain limited, BP chief executive Bob Dudley said, even as he expressed alarm at the worsening violence.

“At the moment oil production isn’t affected,” Dudley said on the sidelines of an energy conference in Moscow.

“I don’t believe that this kind of difficulty and instability will spread all the way to the far south of Iraq” — home to most of the country’s oil operations.

“But we should all be very alarmed by what is happening,” Dudley told reporters at the World Petroleum Congress.

BP has so far removed only non-essential staff from Iraq, which produces about 3.5 million barrels of oil per day (bpd).

The company is part of a consortium that is hoping to significantly increase output at the giant Rumaila oil field in southern Iraq.

While most of Iraq’s oil and gas fields are in the centre and the south of the country, militants have seized territory in Iraq’s oil-producing Kirkuk province in the north.

– OPEC waiting –

The bloodshed in Iraq has a direct bearing on the oil market because the country is the second-biggest crude exporter in the 12-nation Organization of Petroleum Exporting Countries after Saudi Arabia.

Speaking in Moscow on Tuesday, OPEC Secretary General Abdullah El-Badri said it was too early to rush to conclusions over Iraq.

“The (oil) installations in the south are untouched… What you see is only speculation, people speculate that there would be a cut in supply.”

He added: “I hope that the (Baghdad) government will control the situation, we have to wait and see.”

The head of the International Energy Agency said her organisation was prepared in the event of disruptions to Iraqi supplies.

“We stand ready to act,” Maria van der Hoeven told reporters as the IEA published its five-year oil market outlook in Paris.

“One of the main drivers behind the creation of the IEA was the ability to react to disruptions in supply, members hold strategic reserves to that effect.

“We will continue to monitor the situation very closely and keep a close watch. We are ready to respond in case of a major disruption,” she added.

Last Friday, as oil prices hit nine-month highs close to $115 a barrel, the IEA had said that supplies from Iraq may not be at immediate risk.

Meanwhile, Iraq’s autonomous Kurdistan region said it wants to increase oil exports to 400,000 bpd by the end of 2014 despite the violence, and objections from Baghdad.

Iraq’s central government insists it has the sole right to export crude and the dispute has worsened relations with Ankara, which is pumping the oil through its territory.

“Our export level can increase, hopefully soon. By July, we may be able to double it, or at least reach 200,000” bpd, Kurdish natural resources minister Ashti Hawrami said at a conference in London on Tuesday.

“By year end we might reach 400,000” bpd, he added at the ‘Iraq Petroleum 2014’ event.

Iraqi Kurdistan’s current exports currently stand at 125,000 bpd, Hawrami said.