Crude oil spike?

Oil prices (NYMEX:CLN14) rise as Secretary of State John Kerry has arrived in Baghdad as border stations are falling and the possibility of a regional war is running high. John Kerry is trying to reform the Iraqi government urging the Iraqis to try to be more inclusive while ISIS continues to overrun northern Iraqi cities.

The Washington Post says that "Al-Qaeda-inspired rebels captured three more towns in the western Iraqi province of Anbar on Sunday, expanding their onslaught against crumbling Iraqi security forces deeper into the heart of the Middle East. The latest conquests give the Islamic State of Iraq and Syria (ISIS) unchecked control of hundreds of miles of territory spanning the Iraqi-Syrian border, erasing the line drawn between the two countries by colonial powers.

The gains also put the militants within easy reach of Jordan and Saudi Arabia, U.S. allies that are among those in the region watching with alarm as the fighters rout Iraqi security forces and close in on Baghdad.

Reports that ISIS fighters had also seized a crossing post on the border with Jordan could not be independently confirmed. There was no indication that either Jordan or Saudi Arabia is under immediate threat from the fighters, whose recent offensives have focused on areas of Iraq and Syria that would form the nucleus of their proposed pan-Islamic state, modeled along the lines of the 7th-century Islamic caliphate. The extremists now appear to be circling back east in the direction of the capital along the Euphrates River valley, territory that was fiercely fought over by U.S. troops confronting a milder version of these fighters in the past decade.

President Barack Obama says that ISIS threatens American interests especially if it turns to global terrorism. It seems that the Sunni extremist control the western borders raising concerns of a larger regional war. Brent Oil (NYMEX:SCN14) prices hit a new 9-month high as Hedge funds are buying oil like crazy. According to Bloomberg News increased bets on climbing crude prices to a record as fighting continued in Iraq. Speculators raised their net-long position in WTI by 4.3 percent using CFTC data.

Oil from the South of Iraq continues to move. Southern Iraq accounted for more than 85 percent of the country's 3.1 million barrels a day of production in April and all of its 2.5 million barrels a day of exports, which are shipped by tanker from the Persian Gulf, according to the latest data from the Ministry of Oil. Some crude can also be sent north to Turkey by pipeline from the autonomous Kurdish region and west to Jordan by truck according to Bloomberg.

Strong Chinese manufacturing data is raising demand hopes even as weak data from France is being discounted. The HSBC's China June manufacturing PMI rose to 50.8 compared with May's reading of 49.4 and market expectations for 49.7. Gold and silver may also get a boost as demand expectations for Chinese physical demand will rise against a backdrop of a Federal Reserve that seems to be saying that rates will stay low forever. 

The Trilby Lundberg survey says the average price of a gallon of regular gasoline (NYMEX:RBN14) in the U.S. has risen by 2 cents over the last two weeks to $3.71 at a time when if it were not for Iraq prices would be falling. The cost of crude a major influence in gas prices can't break as the Middle-East stability is questionable.  

In Ukraine hopes for a cease fire are rising. Dow Jones reported that President Vladimir Putin expressed his support for a recently declared cease-fire by Ukrainian government troops. They said that Mr. Putin stopped short of saying that Russia would try to rein in the separatists it has been accused of arming. Gazprom says that Russian gas flows to Europe via Ukraine were stable on Monday.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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