Oil traders are too complacent about the longer-term threat of the escalating violence in Iraq, banks from Citigroup Inc. to Bank of America Corp. said.

Brent oil for August delivery rose 5 percent this month on the ICE Futures Europe exchange in London, a third more than the gain in crude for the end of 2018. Violence in Iraq is the biggest risk to new supply this decade from any nation in the Organization of Petroleum Exporting Countries, the International Energy Agency said June 13.

While fighters from the Islamic State in Iraq and the Levant have seized cities north of Baghdad, the majority of oil assets are in the south and east. Still, having the al-Qaeda splinter group within miles of the nation’s capital threatens to derail plans to increase production.

“The market has worked itself into an extraordinary level of complacency,” Seth Kleinman, European head of energy research at Citigroup in London, said by phone on June 19. “The reality is that Iraq matters now and, given what a big component it is of global production growth, it matters possibly even more for the future.”

Brent contracts for August settlement reached a nine-month intraday peak of $115.71 a barrel on June 19 and traded for $114.83 at 12:20 p.m. today in London. December 2018 futures of the grade have advanced 3.9 percent this month, last trading at $98.47 a barrel. The North Sea grade is used to price more than half the world’s oil, including Iraq’s Basrah Light grade.




US current account balance 18 06 2014 
  • Prior deficit 81.1bn. Revised to 87.3bn
  • Equal to 2.6% of GDP largest since Q3 2012
  • Export receipts fell 1.3% to $803.3bn (blamed on the winter – shock)
  • Imports were up 1.5% to $914.4bn
  • There’s also been revisions going back to 1999 which may have added to the numbers produced.
    USD/JPY sliding 8 pips to 102.15
     
USDJPY daily 
The US dollar is at the lows of the day at 102.09 against the yen after weak current account data. The pair is down 10 pips since the report as Treasury yields decline. Earlier today the pair hit a one-week high of 102.31.
What’s interesting is that the current account report was restructured to include definitional changes and new methods to revise numbers back to 1999. That leaves economists scratching their heads rather than drawing conclusions.
There are bids at 102.00 and just ahead. More at 101.82 but the larger bids are at the 200-dma at 101.61.

S&PTSX composite index 

The Canadian dollar caught a lift today after flow data showed a the largest inflow in a year into Canadian financial assets in April. One of the drivers was foreigners buying Canadian stocks. It’s turning into a good year for Canadian stocks, especially with the latest rally in oil prices. The index is up 10.6% ytd and just climbed above the all-time closing record.