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Why the oil market is shrugging off Iraq…for now

Sunni militant fighters attacked part of Iraq’s main oil refinery in the northern city of Baiji Tuesday night, according to an oil ministry official. As of Wednesday morning, the refinery was partially in flames.

Related: Don't panic about oil because of turmoil in Iraq: Former BP CEO Browne

While this attack adds to the turmoil within Iraq and gives militants a new source of income, it so far hasn’t increased the price of crude oil. The Iraqi oil fields in the south of the country are still safe, and exports from terminals in the Persian Gulf are actually accelerating. Exports of Barish Light Crude (the main type of crude in the region) are actually close to a three-decade high set in February.

“Oil prices are up but you would think they’d be much higher given the risks that are out there right now,” says Yahoo Finance editor-in-chief Aaron Task.

Related: Stay in stocks; There's still massive liquidity in the market: Jack Ablin

The U.S. shale boom is also calming global oil prices; oil exports from the U.S. were at their highest level in 15 years this April. Daily shipments of crude have seen more than a sixfold increase since April 2012. “We are having a major revolution here in domestic energy production,” says Task who points out that Canadian production also helps; the U.S. now imports more oil from Canada than it does from OPEC.

China’s economy may also play a role in crude oil prices. “If the Chinese economy was booming and their demand for oil and gas was as voracious as it had been in recent years, I think you would see oil prices above $120 right now, perhaps even back to the $140 levels we saw in 2008,” says Task. West Texas Intermediate Crude oil (the benchmark for the United States) is now pushing $107 a barrel.

The turmoil in Iraq has so far left little impact on U.S. markets, but that doesn’t mean they’re in the clear. “With something like this you could have people over the course of time say, ‘hey, wait a minute this is actually a big problem,’” says Task. “It could be a slow realization of, ‘uh-oh, we’ve got a major problem on our hands.’”

Related: Lifting the ban on oil exports could create more than a million jobs: study

The Islamic State of Iraq and Syria (ISIS), a Sunni militant group which was once backed by al-Qaeda, has been mounting attacks in Syria since the start of their civil war in 2011. The group has now moved into Iraq, taking control of Mosul, the largest city in the North, and other key oil-rich cities like Baiji and Tikrit. Other cities in the west of Iraq are currently under attack and insurgents are closing in on Baghdad.

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