Tags: United States | oil | Iraq | price

CNNMoney: America Is Holding the Lid Down on Global Oil Prices

By John Morgan   |   Tuesday, 12 Aug 2014 03:23 PM

When Middle East tensions boil over into violence, the world is used to spiking oil prices as a result. Not this time.

Even with violent chaos in Iraq and Syria that appears ready to spread, oil prices are acting benignly for a variety of reasons, according to CNNMoney.

On the global market, crude oil is still trading under $100 per barrel, and the average price for gas in the United States is $3.48 per gallon — less than it was a year ago.

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"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," CNNMoney said.

Tom Kloza, chief oil analyst at GasBuddy.com, said most Iraqi oil comes from the south of the country that so far has not been involved in the fighting against the radical Islamic State of Iraq and Syria (ISIS).

U.S. airstrikes against ISIS have also had a calming effect by containing the threat from the violent group, according to Phil Flynn, an energy analyst with the Price Futures Group.

"They're not going to be able to compromise oil supplies while they're dodging bombs left and right," Flynn said. He said a hike in global oil production has also helped to contain prices.

But CNNMoney said the biggest reason for the non-volatile reaction from commodity markets to Middle East bedlam is rising U.S. energy production. Government data showed America produced more than 13.6 million barrels of oil daily in the second quarter of 2014, up 50 percent from the year-ago period.

"That's helped provide a nice cushion for oil prices in the face of geopolitical tension in Iraq and beyond," CNNMoney said.

Kloza said that if not for the Middle East problems, gas prices would be even lower at this point because of booming U.S. production.

The International Energy Agency (IEA) agreed higher U.S. energy production is helping hold the line on global oil prices, Reuters reported.

While the IEA said the security of some major oil-producing countries "remains more at risk than ever," in its latest report it concluded oil supplies are relatively abundant. The Organization of the Petroleum Exporting Countries has raised output to a five-month high of 30.4 million barrels per day.

"Despite armed conflict in Libya, Iraq and Ukraine, the oil market today looks better supplied than expected, with an oil glut even reported in the Atlantic basin," the IEA report said.

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