Brent Oil Drops as Iraq Conflict Seen Sparing South

03:03 PM @ Wednesday - 18 June, 2014
Brent fell from the highest price in nine months amid speculation that violence in Iraq won’t spread to the main oil-producing areas in the nation’s south. West Texas Intermediate was steady in New York.

Futures dropped as much as 0.4 percent in London. Islamist militants fought with the army in a town near Baghdad and with Kurds in the oil-rich northern province of Kirkuk, as the U.S. weighed options to stem an offensive that threatens to fracture OPEC’s second-biggest producer. U.S. crude inventories probably slid by 750,000 barrels last week, a Bloomberg News survey shows before an Energy Information Administration report today.

“Until we see something happen in the south of Iraq, I suspect we’ve seen the top of any significant price surge for Brent,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone today. “It’s really become a sectarian conflict and this could drag on for some time.”

Brent for August settlement declined as much as 40 cents to $113.05 a barrel on the London-based ICE Futures Europe exchange and was at $113.40 at 4:55 p.m. Sydney time. The contract rose 51 cents to $113.45 yesterday, the highest close since Sept. 9. The volume of all futures traded was about 45 percent above the 100-day average. Prices have increased 2.4 percent this year.

WTI for July delivery was 23 cents higher at $106.59 a barrel in electronic trading on the New York Mercantile Exchange. The U.S. benchmark crude was at a discount for August of $6.81 to Brent.

Iraq Fighting

Brent rallied 4.4 percent last week, the most since July, as the unrest in Iraq fanned concern that oil supplies may be disrupted. The Organization of Petroleum Exporting Countries member pumped 3.3 million barrels a day last month, data compiled by Bloomberg show.

Gunmen from the Islamic State in Iraq and the Levant, a breakaway al-Qaeda group known as ISIL, attacked Kurdish forces yesterday, leaving two soldiers and a civilian dead and almost 50 people injured, according to al-Mada news agency. President Barack Obama will send 275 U.S. military personnel to protect diplomatic posts in the country, the White House said on June 16. He’s set to brief congressional leaders today on options being considered.

Kurdish troops have taken control of the Kirkuk oil field, Iraq’s fourth-largest, after the military abandoned the area last week. The fighting hasn’t spread to the south, which the EIA estimates is home to three-quarters of Iraqi output.

Exports of Basrah Light crude, the country’s main grade, may reach about 2.8 million barrels a day next month, according to a preliminary loading plan obtained by Bloomberg on June 16. That’s 11 percent more than this year’s average and would be close to matching a three-decade high in February.

Oil Supplies

Crude inventories in the U.S., the world’s biggest oil consumer, decreased by 5.7 million barrels in the week ended June 13, said a person familiar with data from the American Petroleum Institute. The industry group in Washington collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines.

Supplies were at 399.4 million through April 25, the highest level since the EIA, the Energy Department’s statistical arm, started publishing weekly data in 1982.

Gasoline stockpiles nationwide shrank by 48,000 barrels, according to the API. A decline of 550,000 barrels is forecast in the Bloomberg survey of eight analysts.
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