Brent And West Texas Oil Prices Higher
Marc Chandler | Jun 14, 2014 02:21AM ET
Some central banks may see the rise in oil prices as inflationary. In the past, the ECB has put much emphasis on headline inflation. Recall that under Trichet's leadership, the ECB hiked rates in the summer of 2008, as oil prices rallied, but as the euro zone sat on the precipice of a significant economic downturn. This is not a criticism with the benefit of hindsight, we argued it at the time as well.
Iraq produced around 3.3 mln barrels of oil a day in May. The bulk of its capacity is in the south. The insurgents are coming from the northeast. Some industry experts has suggested that if Iraqi output is taken off line, it may be worth $20-$30 a barrel for Brent.
The gains scored early in Friday's session have largely been reversed, with the front month contract off about $1.50 from the session highs, leaving it a few cents higher than yesterday. It looks like a some (prudent) profit-taking ahead of the weekend, which is likely to see the debate about a potential US military response (drones?). Given a host of political considerations, the course that the US government appears to be contemplating seems to be largely delay tactics-an attempt to frustrate and raise the cost to the insurgents, but not a strategy for victory.
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