The IEA reported that Iraq is now producing 2.3 million barrels a day which according to the Financial Times has outstripped pre-war levels for the first time. The numbers show that Iraq is now producing 2.3 million barrels of oil,  up 1.9 million from the outbreak of war in 2003. Just last January Iraq's production was pegged below 1.7 million barrels of oil a day during the dark days of the war. Why this sudden success? Well, it is because the surge in Iraq is working. Just today Lt. General Ray Odiemo, the second ranking US General, says that violence in Iraq is at its lowest levels since the first year of the American invasion. In fact he said that the violence last week was the lowest ever. This, according to AP, is opening  a window for reconciliation among rival sects.

 

But sadly there are still some issues in that region. On Sunday Turkish planes bombed northern Iraq targeting Kurdish rebels. This was the second operation this month. AFP says that the rebel Kurdistan Workers' Party (PKK), which has waged a deadly insurgency in southeastern Turkey since 1984, maintains a network of rear-bases in the rugged Qandil Mountains near where the borders of Iraq, Iran and Turkey meet.

 

For oil traders the worry is the northern pipeline that has run as much as 300,000 to 400,000 barrels of precious crude a day but has been sporadic.    Obviously if the tensions increase it could be cut off. This comes at a time when Iraq's oil industry is getting ready to boom and has been one of the major factors why oil pulled back from near record highs.  Progress in Iraq and the War on Terror is a bearish factor for oil.

 

Obviously the other issue is the economy. Hot inflation readings last week are raising fears about just how much wiggle room the Fed has left in any rate cutting. Oil prices led the surge but food prices won't be  far behind.

 

Wheat made an all time high overnight as US exports are soaring and the cry beans in the teens are being heard from the pits in Chicago. Talk of recession and stagflation but what oil traders are seeing is a drop in demand due to the swift kick in price.

 

It is a winter wonderland in Chicago.   Though it's cold, it is not below normal. It is winter in case you forgot. So just pull your laptop near the fire and sign up for your free trial of Alaronenergies and get signed up for the Phil Flynn Blast. Call me today at 800-935-6487 or email me at pflynn@alaron.com. Open your account to trade energy or grain or any futures or options on futures.

 

Sell February crude at 9200 -  stop 9480.

 

Sell January heating oil at 26500 -  stop 27500.

 

Sell January RBOB at 23500 -  stop 24500.

 

We're long  January natural gas from  apprx 703 -  stop 680.

 

Have a GREAT day!