Alpha-Bank Analysts: War in Iraq Has Little Influence on Oil Prices

The outbreak of war in Iraq no longer has any significant influence on oil prices. This announcement was made by Konstantin Reznikov, an analyst at Alpha-Bank. 'In our opinion, the price of a barrel of oil may drop to USD 25-28 but any prices at less than USD 25 is simply a 'speculative game',' said the expert. He added that the war is not the most important factor any more where oil prices are concerned. 'USD 25-28 is a reasonable guess because US oil reserves are currently lower than they have ever been since the early 1990s,' said Mr Reznikov.

He believes that the USA will soon have control of the region and this will lead to greater oil extraction in Iraq. However the analyst warned against over-optimistic forecasts concerning US oil extraction in Iraq. He explained that it will take at least 2 years and USD 10 billion to reestablish the levels of oil extraction in 1990 (3.5 million barrels a day). This figure may be more, the analyst added, if any serious damage is done to the oil industry during the military campaign.

Mr Reznikov pointed out that 2.4 million barrels of oil are currently being extracted every day. 'How soon the price of oil will drop to USD 25 depends on the length and success of the war. Any reports of Iraq burning its oil fields could raise the price to USD 30,' said Mr Reznikov.

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