FT: Oil investors bet on future supply risks

Bloodshed in Iraq, sanctions on Russia, conflict in Palestine. If you had asked oil market participants at the start of the year if such events would coincide, and yet the price of Brent would stay near $100 a barrel, few would have agreed. But the reality has proved rather different.

Geopolitical upheavals across the globe involving major oil-producing nations have failed to disrupt production in any meaningful way. Iraqi supplies have not been significantly damaged despite the violence that is ravaging the country, while Libyan production and its exports are on the rise.

At the same time, excess supplies in the North Sea and the Atlantic Basin – as demand from European refineries remains weak – has compounded the effect of large increases in North American production.

Since rising to $115 a barrel in mid-June, amid initial fears that fighting with Islamist militants in Iraq would result in major stoppages, the prompt price of Brent crude has since dropped to 14-month lows.
MORE