President Barack Obama told congressional leaders yesterday he will deploy as many as 275 U.S. troops to Iraq to protect the American embassy. He also opened the door to air strikes and increased military aid to help the Iraqi government defeat the Islamic State in Iraq and the Levant, or ISIL. West Texas Intermediate fell amid speculation recent gains were excessive as supplies remained near a seasonal record.
“It takes an extreme amount of fortitude to be able to sell this market right now,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “One headline and this market could jump $3. Brent is much more vulnerable to geopolitical events than WTI.”
Brent for August settlement added 51 cents, or 0.5 percent, to $113.45 a barrel on the ICE Futures Europe exchange, the highest closing price for a front-month contract since Sept. 9. The volume of all futures traded was 17 percent above the 100-day average for the time of day.
WTI for July delivery dropped 54 cents, or 0.5 percent, to $106.36 a barrel on the New York Mercantile Exchange. The contract ended last week at $106.91, the highest since Sept. 18. Brent’s premium to WTI widened to $7.09 a barrel, the most since May 28.
Prices pared losses after the American Petroleum Institute was said to report that U.S. crude inventories dropped 5.7 million barrels last week, according to two people familiar with the report. Supplies at Cushing, Oklahoma, the delivery point for the Nymex contract, increased 255,000 barrels. The July contract was down 30 cents at $106.60 at 4:54 p.m. in electronic trading.
Islamic militants last night attacked a prison in Baquba, putting the city on the frontline of a Sunni guerrilla campaign that poses the gravest threat to Iraqi Prime Minister Nouri al-Maliki so far.
Brent gained 4.4 percent last week, the biggest weekly increase since July, as the unrest in Iraq fanned concern that supplies from OPEC’s second-largest producer may be disrupted. WTI climbed 4.1 percent, the most since December.
The nation’s oil output hasn’t been hurt by the violence, the International Energy Agency said today. Iraq’s oil exports from its southern terminals on the Persian Gulf are poised to surge, according to a preliminary loading plan obtained by Bloomberg News yesterday, at a time when fighting has plunged the north into chaos.
Exports of Basrah Light crude, Iraq’s main grade, may reach about 2.8 million barrels a day next month. That’s 11 percent more than this year’s average and would be close to a three-decade high of 2.799 million barrels that Iraq said were exported from all its ports each day in February.
“At this moment, not a single barrel of oil has been displaced compared with the situation a week ago,” Maria van der Hoeven, executive director of the Paris-based International Energy Agency, said on a conference call today. “But of course we can see that the market is worrying.”
The fighting hasn’t spread to the south, which the U.S. Energy Information Administration says is home to three-quarters of Iraq’s crude output. Iraq pumped 3.3 million barrels a day of crude in May, second in the Organization of Petroleum Exporting Countries only to Saudi Arabia, according to data compiled by Bloomberg.
“What we know now on Iraq has already been taken into the price, so for a further rise there would need to be an escalation that affects supply,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by phone. “We are coming out of an overbought situation so there is a bit of market retracement.”
The EIA, the Energy Department’s statistical arm, will release its weekly petroleum data tomorrow. Crude inventories probably shrank by 750,000 barrels last week, according to the median projection of eight analysts surveyed by Bloomberg News. Supplies increased to a record 399.4 million in April.
Gasoline futures gained 1.93 cents, or 0.6 percent, to $3.0911 a gallon on the Nymex. Ultra-low sulfur diesel climbed 2.01 cents, or 0.7 percent, to $3.0180.
“Everybody’s got their hands in their pockets right now,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Geopolitically we are still waiting to see what will happen in Iraq and here we are waiting for the EIA report.”
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