Jal Irani, Managing Director - Oil & Gas Research, Macquarie Group has expressed his concerns of the Iraq crisis and likely effect on crude price is as discussed below:
We believe there is a material upside risk to crude oil prices. The risk is in the form of Iran supplies decreasing. Essentially, the world right now has a surplus oil capacity of 3.8 million barrels a day. Iran itself produces 2.5 million barrels a day. The EU which consumes about 0.8 million barrels a day has firmly stated that by the middle of this year it is going to stop consuming from Iran and there is pressure on Asia to similarly do so. As a result, press reports suggest India, China and Japan are going to reduce production by 10% fairly soon. We are essentially talking about 0.9 million barrels a day going out very quickly and over a period of time a total of 2.5 million barrels a day at risk from Iran. Out of the spare capacity of 3.8 million barrels a day, 2 million barrels a day are with OPEC members other than Saudi Arabia. Now at USD 125 per barrel, we feel these OPEC producers are anyway producing full blast. So, one gets the feeling that there isn't really spare capacity on that front.