Brent rose above $114/bbl on increased violence in Iraq, which produced 3.3 MMbbl/d last month.
- The Islamic State in Iraq and the Levant (ISIS) (aka Islamic State in Iraq and al-Sham), a breakaway al-Qaeda group, captured Mosul, Iraq's second largest city. ISIS had already captured the town of Jalawla. Clashes now continue in Saddam Hussein's hometown of Tikrit, which is located just 130 kms from Baghdad.
- Govt is finding it difficult to defend their Sunni-majority regions (mostly North), as the govt is Shiite-majority (Prime Minister Nouri al-Maliki). Violence has not spread to Southern regions, which produce 3/4 of oil volumes. Shia-Sunni population split in Iraq is 60-40.
- If violence spreads to Baghdad, analysts expect $125 Brent.
- PM's position in the govt seems to have weakened, as he was unable to get the parliament decide on a state of emergency.
- Kurdish forces have moved to Kirkuk to protect their oil fields and city. Part of pipeline that exports crude oil to Ceyhan from Kirkuk has fallen under the control of ISIS, he said. The pipeline to the 310,000 barrel a day Baiji refinery was also under ISIS control. When ISIS seized Mosul on June 11, it forced a halt to repairs to the main pipeline from the Kirkuk oil field to the Mediterranean port of Ceyhan in Turkey.
- Iran (Shiite) said it will support current Iraq govt against militants and had already sent troops in support. However, ppl believe that Iran forces are supporting Iraq to protect Baghdad and the holy Shiite cities of Karbala and Najaf (ISIS have threatened attacks on these three places).
- President Obama said he will support Iraq govt and he is weighing airstrikes (Iraq officials have allowed for the same).
- Back story: The U.S. invasion of Iraq in 2003 and the subsequent rise to power of the Shiite-Muslim majority alienated their Sunni counterparts, who governed the country during Saddam’s era. Maliki, who came to power in 2006, alienated Sunnis from the country’s political process. Sunnis are a majority in Anbar Province to the west and in areas to the north of Baghdad. Shiites account for the majority in the south, where 60 percent of the country’s oil wealth resides, and have close religious and political ties to Iran. Shiites were marginalized and persecuted at the hands of Sunnis during Hussein's nearly 25-year rule. (Find maps below for better understanding)
Sources: WSJ and Bloomberg
