Crude Oil speculators seem totally unphased by the ongoing tensions in the Middle East. As Israel-Gaza moves to the back burner, ISIS takes to the headlines with this new Islamic group capturing more land to annex to their so called Islamic state. Crude oil added a few cents this morning but is trading well below the $10 price at 97.95 as the world continues to be well supplied and there seems to be no supply disruptions in the conflict zones. Islamic State fighters seized control of Iraq’s biggest dam, an oilfield and three more towns on Sunday after inflicting their first major defeat on Kurdish forces since sweeping across much of northern Iraq in June.
Capture of the electricity-generating Mosul Dam, after an offensive of barely 24 hours, could give the Sunni militants the ability to flood major Iraqi cities or withhold water from farms, raising the stakes in their bid to topple Prime Minister Nuri al-Maliki’s Shia-led government. Within just a few months, the Islamic State in Iraq and Syria (ISIS) has become the most feared jihadist organization on the planet — even more so than its parent group, al-Qaeda. In early June, ISIS conquered the northern Iraqi cities of Mosul and Tikrit, and has more recently been threatening to overtake the capital, Baghdad. ISIS seeks to create an Islamic state in eastern Syria and northern Iraq based on sharia law. Thus far, the group has captured territory from the fringes of Aleppo in eastern Syria to Fallujah in southern Iraq to Mosul in the north.
U.S. crude futures edged lower on Monday, trading near six-month lows reached in the previous session, as brisk supplies kept sentiment weak and stretched oil’s losses from last month. The front of the Brent futures price curve is trading at a heavy discount to later delivery barrels in a formation known as a contango. This discount has now lasted longer than any since early 2011, reflecting “weak physical demand and an oversupplied Atlantic Basin. CVR Refining LP CVRR.N has said that its 115,000-barrel-per-day Coffeyville, Kansas, refinery could be down for four weeks after a July 29 fire in the facility’s isomerization unit. The refinery is a big consumer of West Texas Intermediate crude. Brent oil gained 30 cents to climb off its 2014 bottom and is trading at 104.97.
The oil market cooled down in the past week despite the decision of Europe and U.S to impose economic sanctions on Russia, which could bring down the oil exports from Russia to the west. Currently, the sanctions aren’t expected to impede Russia’s oil production only down the line.
The recent drop in oil prices may change course if the demand for oil in the U.S keeps picking up and stockpiles continue to contract. Finally, the tensions between Russia and the West could keep oil prices elevated in the short term.
