Have Asia's oil buyers and traders become so inured to supply disruptions that the potential disintegration of the world's fourth-largest crude exporter barely causes a ripple in regional markets?
The stunning victories of the hardline Islamic State in Iraq and the Levant (ISIL) in capturing Iraq's second city Mosul and advancing on the capital Baghdad have grabbed headlines and moved prices, yes, but do not yet appear to have raised long-term supply worries.
Global oil benchmark Brent gained 3.2 percent from June 10 to close at $113.02 a barrel on Thursday, indicating some level of concern about developments in Iraq.
The key Middle East marker, the Dubai Mercantile Exchange's Oman futures, rose by 2.8 percent over the same period.
The DME contract is more relevant for Asian crude buyers, given their reliance on heavier, more sour grades from the Middle East, as opposed to light, sweet crudes such as Brent.
And with the forward DME curve remaining in backwardation, it seems evident that there is little concern in Asia that supplies from Iraq will be at risk in months to come.
The Oman curve <0#OQ:> has steepened at the front in line with the price increases, but further out it remains in a fairly normal pattern of mild backwardation, a sign that traders don't expect significant supply disruptions in the next 12 months.
If they did, the curve would be tending towards contango, where prices for longer-dated contracts exceed those for shorter-dated futures.
The question is whether the market is correct in being relatively sanguine about the risks of supply disruptions from the developing conflict in Iraq.
Certainly the speed at which the ISIL fighters were able to capture Mosul and move on Baghdad, and the capitulation so far of the Iraqi army has caught most observers by surprise.
The case for a limited threat to Iraqi oil supplies rests on the view that the vast majority of its exports come from the southern part of the country, which is still in government hands and is home to many supporters of the Shi'ite Prime Minister Nuri al-Maliki.
This assumes that if ISIL, which aims for a Sunni Islamic caliphate straddling Iraq and Syria, tries to capture the south, it will face more serious resistance.
Iraq exported 2.582 million barrels per day (bpd) in May, an 8 percent gain from April but below the government's target for 3.4 million bpd.
That target includes 400,000 bpd from the autonomous Kurdish region and a northern pipeline to Turkey - although the pipeline is currently out of commission after being damaged by militants.
The Kurds are also able to ship 100,000 bpd through a separate pipeline to Turkey, although the Iraqi government is in dispute with the Kurdish authorities over who has the right to sell the oil.
The crisis in Baghdad over the threat posed by ISIL may actually boost oil exports from the north, as the Kurds are likely to push for, or assume, more independence.
Their forces have occupied Kirkuk, an oil-rich city in the north of Iraq, and it is possible that the Kurds will seek control over the currently inoperable pipeline from the city to Ceyhan in Turkey.
The Baghdad government is probably now entirely focused on its own survival and is thus unlikely to be able to challenge the Kurds, or devote time and energy to boosting supplies from the south of Iraq.
A possible scenario for Iraq is that it becomes a failed state, effectively split into autonomous Shi'ite, Sunni and Kurdish areas, with ongoing clashes between them.
Such a scenario is hardly bullish for Iraq's oil exports, and just maintaining current levels may become a challenge.
SAUDI ARABIA, IRAN THE BACKUP
Thus it will fall to Saudi Arabia, and possibly Iran, to make up any shortfall to Asian refiners.
The Saudis are still able to ramp up output if needed, but probably not by enough to handle any major outage of Iraqi shipments.
Iran stands as the major beneficiary, assuming it can negotiate a further relaxation of Western sanctions imposed on its disputed nuclear programme that are currently supposed to hold its crude exports at around 1 million bpd.
This level is being breached - with Asian buyers of Iranian oil importing 1.25 million-1.3 million bpd in the first six months of the year - although U.S. officials say Tehran is just inside ambiguous limits placed on its shipments since most of the overage is condensate.
Iranian Oil Minister Bijan Zanganeh said on June 10 that his country could raise oil exports by 500,000 bpd "very quickly" if sanctions were eased further.
So far, Asian crude buyers appear to be adopting a wait and see approach to the conflict in Iraq, confident that the beleaguered nation will continue to ship cargoes, and even if it doesn't, that others can make up the shortfall.
The risk is that while there is still enough oil globally to deal with any Iraqi disruption, much of it is lighter oil from the U.S. shale boom, and not the heavier grades preferred by Asian refiners.
It's not just that there has to be enough oil to go around, it has to be of the right type, too, and it's here where the main risks lie for Asian crude buyers.