Iraqi Geography Behind Falling Oil Prices

The drums of war are beating in Iraq, but you wouldn’t know it from looking at oil prices.
The average price for a gallon of gas in the U.S. is $3.48. That’s cheaper than it was a year ago, according to AAA.

On the global market, the price of crude oil is still trading under $100 per barrel. It’s a notable phenomenon considering that the United States is engaged in an open-ended bombing campaign against extremist militants in an oil producing country.

How is this possible?

For starters, it has to do with the geography of the violence, according to Tom Kloza, chief oil analyst at GasBuddy.com.

Kloza explains that most Iraqi oil comes from the Baghdad and areas in the south of the country, which so far haven’t come under attack from combatants from the Islamic State of Iraq and Syria (ISIS). Rather, most of the fighting has occurred in the north near Mosul, the second largest city in Iraq, and Irbil, the Kurdish regional capital. The affected region contributes about 15% of Iraq’s oil production.

Oil spiked to over $107 per barrel in June when ISIS first began taking over wide swaths Iraq, but Kloza says oil traders now “aren’t buying on the premise that this could spread to southern Iraq.”

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza