Brent crude fell below $110 a barrel yesterday, taking the price back to the level it was before the crisis sparked off in Iraq almost a month ago.
News that Libya is set to ramp up production after rebels ended an almost year-long blockade on oil exports from two major ports put further pressure on the benchmark.
Sunni militants took over Iraq’s second largest city Mosul last month, escalating tensions that had been simmering for months. Fears that the unrest would hit production caused the price of brent crude to rise above $115 a barrel late last month, but so far the militants have failed to expand into the south of the country where 90 per cent of Iraq’s oil reserves lie.
Bank of America Merrill Lynch research warned that the market was being “complacent” and said too little risk was being priced in. “We believe the turmoil has caused a significant increase in geopolitical risks, which markets keep ignoring,” said the bank’s analysts.
But Jonathan Wood, senior analyst at Control Risk, argued that there was “not a security concern” around Iraq’s oil fields, adding that suspension of Iranian sanctions had helped stabilise prices.