Stability In the stock market and rising geopolitical risk is keeping oil from totally breaking down. Even with the cease fire in Gaza, gains by ISIS in the Kurdish region in Iraq and Russian troops again amassing by the Ukrainian border is giving oil some support. Yet with falling refining margins and maintenance season ahead refinery demand for oil is about to cool off.
Oil(NYMEX:CLU4) is trying to ignore geopolitical headlines. While Israel and Hamas agreed to a 72-hour cease-fire in Gaza easing momentum, yesterday’s report of Russia adding battalions near the border with Ukraine and conducting war games by the border is creating unease.
Isis gained ground capturing the northern Iraqi town of Zumar and a nearby oil field. Bloomberg reports that ISIS took control of two oil fields and some predominantly Kurdish towns in northern Iraq following clashes, according to the Northern Oil Co. The Ain Zala and Batma oil fields, which together have an output of 30,000 barrels per day, are under full control of the group, according to a statement by the state-run Northern Oil Co. The Sunni Islamist militants last month occupied the Qayyara oil field north of Baghdad. Islamic State, which was previously known as Islamic State in Iraq and Levant, has seized territory in northern and western Iraq, taking over oil wells and fighting for control of refineries.
Dow Jones reports that Iraqi Prime Minister Nouri al-Maliki authorized the air force to provide support to Kurdish fighters battling Sunni extremists in the country's northwest, a day after the insurgents seized territory from Kurdish forces.
Yet despite that gas prices and RBOB(NYMEX:RBU14) prices are tumbling. The national average retail price of regular gasoline fell 2.4¢ to $3.515 a gallon according to the EIA. U.S. gas demand is disappointing and may inspire refiners to go into maintenance early.
Ethanol traders are pricing in a record corn crop yet we did see corn crop ratings slip last week due to dry weather. The U.S. Department of Agriculture reported that 73% of the crop was in good or excellent condition, down from 75% last week. Corn prices bounced from their lowest in four years.