Rising violence and uncertainty in Iraq has led to a leap in crude oil prices as Sunni Islamist militants march toward Baghdad and have surrounded the country's largest oil refinery in Baiji. Gasoline prices are expected to climb five to 10 cents higher.
Thursday that Brent futures increased $3.07 and finished at $113.02 a barrel, the highest level since Sept. 9, while U.S. oil soared $2.13 and topped out at $106.53 a barrel, also the highest close since Sept. 18.
Iraq is the second-largest oil producer in the Organization of Petroleum Exporting Countries and a possible disruption in oil supplies there can be a negative net global effect, Christopher Bellew, a trader at Jefferies Bache, told Reuters. USA Today reported that Iraqi oil production has already plummeted 10 percent
since the outbreak in violence, a loss of about 300,000 barrels a day since March.
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"The fear is that will cause a threat to Iraqi oil exports," Bellew told Reuters. "If this conflict knocked out Iraq as an exporter, that would have significant impact on prices."
Motorists are expected to see the increase at the gas pump, driving regular unleaded gas five to 10 cents higher than the average of $3.64 currently, Tom Kloza, senior energy analyst at Gasbuddy.com told USA Today.
"We're not looking at a Gas-zilla event; it'll probably be a slow drift higher rather than skyrocketing,'' Kloza told the newspaper.
USA Today reported that gas prices averaged $3.58 a gallon between Memorial Day and Labor Day last year, but prices are already seven cents higher. The newspaper said the hike is a change from the last three years where gas prices evened out ahead of peak summer driving season.
The U.S. Energy Information Administration reported Thursday that America's oil stockpiles fell 2.6 million barrels last week while gasoline supplies grew, according to Bloomberg Businessweek
OPEC has not changed its daily production target of 30 million barrels, thus leaving output below demand in 2014, noted Businessweek.
"There should be draws in crude inventories and increases in gasoline stocks; this is the time of year that it should happen," Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, told Businessweek. "OPEC obviously likes prices at this level."
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