View Full Version : Iran Iraq Oil Tensions See Crude Prices Rise

18th December 2009, 10:28
Crude futures are up 2.2% following reports that Iranian troops crossed the Iraqi border and took control of an oil field in southeastern Iraq. An official of the state-owned South Oil Company in told Agence France Presse that Iranian forces took control of Well 4 in the Fauqa Field, part of a cluster of fields Iraq unsuccessfully put up for auction to oil majors in June. The field has estimated reserves of 1.55 million barrels.

“It took control of Well 4 and raised the Iranian flag even though the well lies in Iraqi territory,” the official added, speaking on condition of anonymity. A U.S. military spokesman confirmed that the incident had taken place, telling AFP that the oil field is in disputed territory between Iran and Iraq, and adding that such events take place relatively frequently.

Though Saddam Hussein’s Iraq fought a bloody, eight-year war with Iran in the 1980s, relations between the Shiite-dominated government of the post-Hussein era and Iran have been relatively friendly. Still, the specter of rising tensions between Iran and Iraq — with the second and third largest conventional oil reserves in the world, respectively — has the markets a bit on edge.

Also, it is December options expiration day, which may boost the chances that we’ll see some heavier trading Friday. “If you hear rumors going into a weekend, you will not take a chance,” said Phil Flynn, analyst with PFG Best in Chicago, told DJ. “It raises the stakes, so whether or not you believe that it is true, traders will err on the side of caution.”