http://blogs.marketwatch.com/thetell/2014/06/17/why-traders-may-be-overconfident-about-the-safety-of-iraqs-oil-exports/




Oil prices are consolidating some of the gains scored last week on worries over Iraq, reflecting confidence that the violence that’s swept the northern part of the country will leave crucial southern oil facilities unscathed. Don’t be so sure.

“As a rough estimate, we put the probability of an actual disruption, partial or full, at 20%. A disruption to southern flows is not probable, but it’s certainly possible, and it is more than a 5% tail risk,” said Societe Generale oil analyst Michael Wittner in a note.

Any sort of disruption could be problematic. Around 2.5 million barrels of oil a day is exported from Basra, Iraq’s main port. That’s a not-insignificant amount of oil in a world that consumes around 92 million barrels a day. Moreover, the raging violence poses a threat to Iraq’s role as the world’s fastest-growing exporter.

Oil futures jumped last week, with both Brent and WTI crude, the U.S. benchmark, rising by around 4% and trading at levels last seen in September. The jump attracted attention, but was viewed as relatively restrained, analysts noted. Brent has been trading around $110 a barrel since the advent of the Arab Spring, while bears have been repeatedly unable to press WTI crude below triple digits.

If Iraqi oil goes off line, $200 oil is next

http://www.marketwatch.com/story/if-iraqi-oil-goes-off-line-200-oil-is-next-2014-06-17?dist=countdown

The ISIS rebels have carved out an impressive swath of territory in northern Iraq. This has enormous implications and risks to the world’s oil supplies.

Months before the ISIS rebels began their threatening move into Iraq’s southern regions, the International Energy Agency was imploring OEPC to produce and export an additional 1.2 million barrels per day (mbd) more oil by the end of 2014.

The sad fact is that out of 12 OPEC members, eight of them are collectively in decline. When summed together Algeria, Angola, Ecuador, Iran, Libya, Nigeria, Qatar and Venezuela were producing just over 14.5 million barrels per day in early 2005; but are now producing just 11.25 mbd.

These countries are losing nearly 500 thousand barrels per day of production per year.

Of the other four OPEC members not in decline, only Iraq has managed to add significant production. It increased its output from 1.75 mbd in 2005 to 3.25 mbd currently.

The nearly 2 mbd of incremental Iraqi production were essential to keeping Brent oil within the price range of $100 to $110 per barrel over the past couple of years.