Crude (NYMEX:CLN14) prices are firm so far this morning as fighting in Iraq continues and the API reported a much larger than expected draw in U.S. crude oil inventories in last night’s report. So far the oil facilities are not in jeopardy and oil flow is continuing from Iraq. As such prices are firm but by no means are they ready for a major surge to the upside.
The United States has ruled out airstrikes for now. The Wall Street Journal reported late Tuesday that President Barack Obama has ruled out using airstrikes against the Islamic State in Iraq and the Levant (ISIS) because U.S. commanders lack sufficient intelligence to determine clear battlefield targets. U.S. officials told the paper Tuesday that airstrikes were still being actively discussed, but Obama was not expected to put military action back on the table quickly.
For now the Iraqi’s are to continuing to go it alone in their efforts to repel the insurgents. Whether or not they are going to be able to continue to hold key cites is still the main question. With the conflict still evolving but still no interruption in the flow of oil from Iraq or any sign that the fighting is spreading to the southern oil region strong buying is not rushing into the market at the moment.
There has to be a more direct sign that the potential for an oil flow interruption is increasing for prices to move strongly higher from the current level. In fact the latest lifting program from Iraq shows they plan to ship about 2.8 million barrels per day in July or the highest level since January of 2012 according to Bloomberg.
Today the FOMC meeting outcome will be announced with the Fed likely to maintain its plan of reducing its QE program while maintaining short term interest rates at historically low levels for the foreseeable future.
Global equities drifted lower over the last twenty four hours. The EMI Global Equity Index declined by 0.10 percent with the year to date gain narrowing to 2.5 percent. Seven of the 10 bourses in the Index remain in positive territory with the ranking of bourses still the same. Canada is still showing a double digit gain as this resource rich market is benefiting from the recent surge in oil prices. Equities have been a slight negative price directional driver for oil and the broader commodity complex so far this week.