The Zacks Analyst Blog Highlights: United States Brent Oil Fund, United States Oil Fund, PowerShares DB Oil Fund and iPath S&P GSCI Crude Oil Index ETN

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Jun 18, 2014, 09:30 ET

CHICAGO, June 18, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the United States Brent Oil Fund (AMEX:BNO-Free Report), United States Oil Fund (AMEX:USO-Free Report), PowerShares DB Oil Fund (AMEX:DBO-Free Report) and iPath S&P GSCI Crude Oil Index ETN (AMEX:OIL-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday's Analyst Blog:

Uprising in Iraq Puts These Oil ETFs in Focus

By now, 2014 can easily be called the year of geo-political tension. First, Russia's invasion into the Ukraine territory and now the possibility of a civil war in Iraq has taken a toll on global stock markets.

Surprisingly, both have a lot to do with global oil prices as those regions are oil rich. As a result, disruption in supplies or any such odds push up oil prices (read: 3 Oil ETFs Stand Out on Russian Tensions).

What is happening in Iraq?

The Iraqi rebellion is being led by Sunni Islamist militants. The root of the issue dates back to 2003 but the violence resurfaced since the removal of U.S. troops from Iraq in 2011 leading to clashes against the central government.

Al Qaeda-style militants – forming the Islamic State of Iraq and Syria, or ISIS, – have captured important cities in northern Iraq and could even try to seize the capital, Baghdad. Their aim is to set up a Sunni state in Iraq and Syria.

Of late, the worsening situation signaled the apprehension of the fragmentation of the Middle Eastern nation into three independent governed territories – the Kurds in the north, the incumbent Maliki-led Shiite government in the south, and the new extreme Sunni insurgents-led growing pocket in the center.

Impact on Oil Prices

Notably, Iraq is the second-largest crude producer in OPEC nations and fifth largestin the world, behind Venezuela, Saudi Arabia, Canada and Iran. Output in Iraq rose to as much as 3.4 million in February, the highest level in more than a decade. Per the International Energy Agency, Iraq is expected to account for 60% of OPEC growth for the remainder of this decade indicating how important Iraqi oil output is to the world.

With the militants having invaded the 310,000 barrel-a-day Baji oil refinery and Mosul, the country's second-largest city, the possibility of some more seizure of oil fields cannot be ruled out.

The Islamic State in Iraq and the Levant, known as ISIL, has already stopped repair works in the pipeline from the Kirkuk oil field to Turkey, per Bloomberg. Hence, the threat for supply disruption spiked oil prices.

Supply scenario in other destinations has also been muted thanks to the violence in South Sudan, sabotage on Nigerian oil pipeline, a curb in production in the African nation of Libya and output lost in international ban on Iran oil since 2011 which got clearance only last November (read: Oil ETFs in Focus on Iran Deal).

The international gauge climbed over $114 a barrel on June 13 for the first time since October. Bloomberg notified that Wall Street analysts projected that Brent Crude price will likely hit the $116-a-barrel mark by the end of the year.

How to Play?

Given this situation, investors may want to consider a closer look at oil investments. While investing in oil futures is certainly an option, investors can also tap into this trend by purchasing ETFs that have exposure to oil futures. The following ETFs should thus be closely watched if the violence escalates and threatens the flow of Iraqi oil supplies in the near term (see: all the Energy ETFs here):

ETFs tracking oil futures United States Brent Oil Fund (AMEX:BNO-Free Report), United States Oil Fund (AMEX:USO-Free Report), PowerShares DB Oil Fund (AMEX:DBO-Free Report) and iPath S&P GSCI Crude Oil Index ETN (AMEX:OIL-Free Report) gained 3.31%, 3.06%, 2.40% and 3.21% over the last five days (as of June 13).

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