ISIS insurgents 40km from Baghdad, but no oil price spike yet.

FT: “It is difficult to overstate the importance of Iraq for the global oil industry. It is the world’s seventh largest producer, with proven reserves of 140bn-150bn barrels of crude oil that analysts say are among the cheapest on the planet to develop.”
“But that is not all. Iraq is also Opec’s second-biggest producer with production of 3.3m barrels a day. Between now and 2019, the International Energy Agency, a leading energy forecaster, expects the country to provide almost two-thirds of the growth in the oil-producing cartel’s production capacity. Yet, as the country slides towards a sectarian civil war, Brent, the international oil marker, has seen only modest gains, rising just over $5 a barrel to a nine-month high of $115 since the onslaught by Sunni militia began two weeks ago.
It is a reaction that has surprised many market watchers given the insurgents are now less than 40 miles from Baghdad. “Looking at previous supply disruptions and even threats in the Middle East this should have taken the price to $120,” says Tom Nelson co-portfolio manager of Investec Asset Management’s Global Energy Fund.
The explanation for the restrained price action is quite simple, say oil traders. Not a single barrel of crude exports has been lost since the Islamic State of Iraq and the Levant (known as Isis) routed Iraqi security forces in the north of the country.
….However, if Baghdad falls to the insurgents the picture could quickly look different – and not just because more than 75 per cent of Iraq oil production comes from the giant structures in the Southern Mesopotamian basin around 150km southeast of the capital.
….Should the global oil market lose all of Iraq’s exports, traders and analysts reckon it would add at least $40-$50 to a barrel of oil and trigger a co-ordinated release of strategic reserves from the IEA and additional supplies from Saudi Arabia.
….In response to the latest fighting, international oil companies have already started to evacuate staff. And while this may not affect production in the near term it will affect development activity and therefore future production growth.”