Oil achieves uneasy calm

Oil prices have pulled back as Iraq’s army makes a stand and the word on the ground is that the yanks are coming. The Obama administration is sending U.S. troops to Iraq, not to fight the threat by the Islamic State of Iraq and Syria (ISIS) and the Islamic State of Iraq and the Levant (ISIL), which are the successor organizations to al-Qaeda in Iraq, but to train and offer support to Iraqi troops and to protect U.S. interests on the ground. For now the production areas in the south of Iraq are safe and producing and exporting normally.

Oil (NYMEX:CLN14) also is getting a little uneasy calm because of Libya oil fields coming back on line. The Wall Street Journal reported that the additional supply, which comes after a Libyan court ruling on who runs the country sparked hopes of political stabilization, has enabled the first delivery of oil from onshore fields to a key refinery for the first time in weeks. It will also potentially free up quantities for exports from offshore platforms, the officials said.

Two officials at the state-owned National Oil Co. said Sunday that production has resumed at the El-Feel field in Southern Libya, jointly operated by NOC and Italy's Eni ENI.MI -0.92% SpA, after protests ended there. Oil flows from Eastern Zilten field, which is controlled by state company Sirte Oil and supplies the Brega oil terminal, also restarted in recent days as the operation was deemed secure enough, they said.

An NOC spokesman couldn't be reached for comment. Together, the additional supplies amount to about 60,000 barrels a day, one official said. Current production is unclear but it was previously around 150,000 barrels a day—or 10% of normal capacity.

Still, I don’t think that based upon past performance that Libya can be counted on long term, but it did ease concerns a bit in the short term.

It might not help at the gas pump. Already prices are rising when they normally should be falling. Gas Buddy says they are leveling off around $3.65. Bloomberg reported that “gasoline (NYMEX:RBN14) in the U.S. climbed this week, boosted by a surge in oil, and is expected to reach the highest level for this time of year since 2008.

The pump price averaged $3.686 a gallon Sunday, up 1.2 cents from a week earlier, data posted on the Energy Information Administration’s website late yesterday show the jump in crude, driven by concern that the crisis in Iraq will disrupt supplies, may boost pump prices by 10 cents a gallon at a time when prices normally drop, according to forecasts including one from the EIA.

“If things deteriorate even more, the spike could be even bigger than that,” Phil Flynn, a senior market analyst at Price Futures Group in Chicago, said by telephone. “If it weren’t for the situation in Iraq, gasoline would be coming down by now. This will probably keep it elevated all summer. It’s really disappointing.”

This comes against a backdrop of increasing U.S. oil production and rising U.S. crude exports. The U.S. Energy Information Administration’s new “Today in Energy” reported yesterday that oil exports that are allowed by the U.S. government are surging.

The EIA says that “The United States exported 268,000 barrels per day (b/d) of crude oil in April (the latest data available from the U.S. Census Bureau), the highest level of exports in 15 years. Exports have increased sharply since the start of 2013 and have exceeded 200,000 b/d in five of the past six months. The increase in crude exports is largely the result of rising U.S. crude production, which was 8.2 million b/d in March.”

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