2014.06.3001:07:52UTC+00Crude oil devalues despite violence in Middle East

Futures for WTI oil resumed the drop it started late last week despite battles continuing to be waged between government forces and armed insurgents from the Islamic State in Iraq and the Levant (ISIL).

The crude benchmark increased in value by 3.8% during the second quarter due to the violence in Iraq, but has lately begun to crawl back down on reports that oil production has mostly been unaffected by the situation. Three quarters of the country’s oil facilities is located in its southern region, far away from the Islamist insurgents.

A barrel of WTI on the New York Mercantile Exchange with delivery dates in August fell by 0.3% on Monday to $105.40, putting it on track to lose value for the third straight day. It fell 1.4% last week after gaining 2.7% for the month.

The dip in prices is being urged on by the belief that Iraq is now be able to deliver on their status as the second largest producer in the Organization of Petroleum Exporting Countries (OPEC) as shown by the 3.3 million barrels it pumped in June, a value eclipsed only by Saudi Arabia. Coupled with the latter country’s capacity to offset any production lost should fighting spread to southern Iraq, risk premiums of WTI are starting to be discarded by investors.

Another factor that may push prices further back is the possibility that Africa’s largest oil reserves will finally resume being tapped as rebels in Libya expressed their intent to reopen the Es Sider port as early as August when the country’s new government is in place. The settling of civic issues may push the fellow OPEC member to improve their status as the group’s smallest producer.