Today, Iraq declared a state of emergency following the occupation of Mosul, the largest city in Iraq's oil-rich northern region, by one of the country's nastiest terror groups.
Oil markets are shrugging off the crisis: Brent contracts were down 0.4% Tuesday.
Usually when supplies are threatened, the price goes up.
Baghdad released a statement saying the state of emergency would not affect exports, according to TradeArabia. And while the takeover occurred in the north, much of the country's production since the end of the war has occurred in the south.
However, shipments out of Kirkuk, 100 miles southeast of Mosul, have already been halted after a March bomb blast damaged a pipeline to Turkey. The IEA warned in its May 15 report that northern exports remained threatened by an unstable security situation.
Two FT commentators believe the market is inadequately pricing how ominous the Mosul take over is:
While ISIS gains have no immediate implications for crude supplies, they send a worrying signal about Iraq's exports: http://t.co/8JRBn6ygwK
— Ed Crooks (@Ed_Crooks) June 10, 2014. @Ed_Crooks Very true Ed -- could impact not only Iraq proper exports, but also nascent #oil exports from @KurdistanRegion area
— Javier Blas (@JavierBlas2) June 10, 2014Iraq production is now near post-war highs of more than 3 million barrels a day. But exports [represented in bars] have recently been falling.
It's quite possible they could starting falling more, soon.