The technicals and fundamentals are aligned for the oil bulls but prices aren’t cooperating as traders begin to get a better handle on the risks in Iraq. WTI prices are fractionally lower today but have been essentially flat since the breakout on Thursday.
WTI crude daily
The first reaction to geopolitical unrest in the oil pits is to ‘buy and ask questions later’. Iraq was an especially good example as the second-largest city in the country fell before many traders even realized trouble was brewing.
Late last week and on the weekend traders had a chance to get a handle on the situation. At the same time, government forces halted/slowed the rebel gains. That gives the US time to assess the situation and plot to protect the sensitive oil areas in the south.
In the north, a pipeline transporting oil to Turkey is shut but it’s been that way since March. The headline to watch out for is some kind of ISIL assault on Baghdad
Aside from Iraq, growing global demand is underpinning prices. The IEA is forecasting global consumption will “increase sharply” in the fourth quarter.
