Military Response to Paris Terror Attacks Could Hit Iraqi Oil Production

The West's response to deadly terror attacks in Paris may generate risk to one quarter of Iraq's oil production.

Although the deadly terror attacks in Paris Nov. 13 has little direct impact on the global oil industry, the West’s military response put a quarter of Iraq’s supply in the line of fire.

Analysts at Raymond James (RayJa) said in a Monday note to investors that throughout the conflict with Islamic State (IS) during recent years, impact on oil supply has been negligible. The majority of oil production – between 1 million and 4 million barrels per day – is located far south of the fighting. Airstrike maneuvers are largely tactical and haven’t impaired supply.

However, if the West increases its firepower with ground missions, oil infrastructure might be in the way.

“The only scenario we can envision that could cause disruptions is an all-out ground assault against IS-controlled territory. Such a war would not deliberately target oilfields that are in friendly hands, but – as had been the case during the 2003 invasion of Iraq and the 2011 war in Libya – all-out combat tends to leave collateral damage when it comes to oil industry infrastructure,” the analysts said, adding that up to 25 percent, about 1 million barrels per day of production, would be at risk.

At Tudor, Pickering, Holt & Co., analysts told investors the Paris attacks could add brick to the oil demand “wall of worry.” As for supply, TPH said escalating volatility in the Middle East does “raise the disruption risk and/or the potential for OPEC to change behavior.”

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