LONDON: Oil markets have staged only a muted reaction to the bloody insurgency gripping OPEC's number two producer Iraq, but analysts warn any disruption to supplies could push prices to record peaks.
The offensive led by the Islamic State of Iraq and the Levant (ISIL) that has swept through the north of the country and is now threatening to rip Iraq apart has sent prices to nine-month highs but they remain $30 below the peaks hit in 2008.
"This contrasts with the period of civil war in Libya in early 2011 that halted production. Back then, oil prices, volatility and skew all reacted far more aggressively," said BNP Paribas analysts Harry Tchilinguirian and Gareth Lewis-Davies.
"The reason for the orderly advance this time is simple: we have not had an actual supply disruption."
Brent oil has surged almost 35 percent since the beginning of the year and is hovering just below the $115.71 dollars a barrel (bbl) hit in early June.
Compare that to the 16 percent the European benchmark jumped in a month to $128.40/bbl when the EU imposed an embargo on Iranian oil at the end of January 2012.
In Dubai, oil futures have even turned bearish, dropping a fifth from their May peak as traders fret about what impact the crisis in Iraq could have if it spills into the broader region.
"With the exception of the first couple of days following the onset of the Iraqi crisis, oil markets have remained admirably calm," said analysts at PVM.
That is mainly because there has been little actual disruption to exports from Iraq so far.
Insurgents have forced the shutdown of the country's main oil refinery but have not managed to break into the key Kirkuk oilfield in the autonomous region of Kurdistan or hit the main oil fields in the south.
OPEC's second-largest supplier produces around 3.3 million barrels of crude a day (bpd) and exported around 2.6 million in May -- less than the 3.52 million bpd the IEA estimates the cartel could produce if needed.
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