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The oil price hits its highest level in nine months as the Iraq crisis deepens

by , 20 June 2014

For the first time in nine months, yesterday the price of Brent crude oil hit over $115 intraday. The oil price is responding to escalating tensions in Iraq as insurgents continue to battle for ground. The latest targets are oil fields around Baghdad. Let's take a closer look at what's going on and what this means for the oil price longer-term…

Risks to oil production are pushing the oil price higher

Iraq is turning into a battlefield. Widespread fighting in the north of Iraq has led to “foreign oil firms beginning to pull out staff,” reports BDLive.

A commodity sales manager at Newedge Japan, Ken Hasegawa, says there are risks of halts to production and they “see further upside to prices,” adds BDLive.

Worries about oil supplies led the price of crude oil to touch $115.71 yesterday, says the BBC. This is the “highest since September 2013”. This as the oilfields located south of Baghdad are unaffected and “export at least 2.5 million barrels per day of oil”.

And higher oil prices could be bad news for South Africa’s ailing economy.

The chief investment officer of Commonwealth Financial Network, Brad McMillan, says that roughly speaking a “$10 increase per barrel can knock about 0.2% from economic growth,” reports Forbes.

Higher oil prices can dent economic growth

With South Africa’s economic growth under severe pressure, rocketing oil prices won’t help. Economic growth contracted 0.6% in the first three months of the year.

This week, the price of Brent crude oil has risen “about 1.2% for the week, after rising 4.4% last week,” notes BDLive.

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You can see the spike in the oil price over the last couple of weeks...

Chart of the price of crude oil

At time of writing, the price of a barrel of crude oil was $114.95.

The issues in Iraq don’t look like they’re going to come to an end in the near future. A higher oil price looks the likely scenario for the moment.

The oil price hits its highest level in nine months as the Iraq crisis deepens
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