Technical & Fundamental Oil Reports Specialists

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A major league game changer

Published Monday, June 23rd, 2014

ISIS, ISIL, Daesh or whatever other name you want to use for them are a game changer. They have tipped the oil market firmly in the direction of the bulls in the short term. They have lifted the myth of a stable Iraq. It does not matter whether you blame President Obama for snatching defeat from the jaws of victory as Republican hawks claim, or Republican hawks for sowing jihadist seeds with their invasion of Iraq in the first place. The fact is that Iraq is now highly unstable and even if the ISIS advance is halted the infection has taken hold and Iraq is more firmly divided than ever between Sunnis, Shias and Kurds..

Overnight their actions have placed both short and long term OPEC supply in jeopardy. Iraq produces 3.3 mbpd and over the next decade is expected to be responsible for the major part of any supply increase from OPEC with production supposed to rise to 4 mbpd at the end of this year, to 5 mbpd by the end of 2015 and on to 6 mbpd + in later years. It looks as though we can kiss goodbye to these as reasonable targets.

One key element in ISIS strategy is to have no qualms about destroying oil and other civilian facilities in order to create shortages, chaos, blackmail opportunities and internal discontent. Therefore whatever the Iraqi government says about their advance being halted it is absolutely no guarantee that Iraq’s southern oil facilities are safe. They may be safe from take over but not from terrorism. The speed with which the major oil companies have evacuated staff from the South of Iraq is a sign that they are seriously concerned and may even have received warnings.

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Posted by David Hufton