Crude oil prices are expected to surge in the event of US airstrikes on northern Iraq.
Jameel Ahmad, chief market analyst for FXTM, said the prices of oil and gold should be closely watched for volatility in the wake of the US’s new airstrikes on Iraq.
He said: “The price of oil jumped yesterday on confirmation that US President Barack Obama has authorised air strikes against Islamic militants in northern Iraq. Light Crude Oil rose 0.79 points to a daily high of 98.45. As it is widely recognised that the northern area of Iraq holds the country’s highest oil reserve – reportedly up to 70% – I expect that oil prices will continue to rise if the conflict is prolonged and a return to the $108 area for Brent (WTI) might be on its way.”
Nigeria’s budget benchmark for 2014 is $77.50 a day, and a further surge in price will allow the country to build its excess crude account after depleting it for years.
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Ahmad added: “Ironically, there were some debates in the market recently about whether oil might have been overbought. The news of the new US airstrikes has quashed all such discussions now and investors will be prudent to keep a very close eye on the fluctuation of oil prices.
“Gold is another commodity to watch as the short to medium term impact on its prices remain unclear. Gold only appreciated by around $10 yesterday, opening trading at 1305.51 and reaching as high as 1314.37. Despite geo-political tensions dominating the news headlines since early July, bullish gains have been very limited for gold.
“If the United States, or any other major political/economic power announces further intervention, then I would expect the price of gold to surge. In the meantime, gradual movements upwards of around $10 a day appear to be the way the market is heading. For now at least, oil seems to be a far more serious contender for a bull run.”
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Nigeria earns over 90% of its foreign exchange from crude oil sales.
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