Brent crude traded close to its lowest closing level in a week after Iraq said oil exports from the south of country would still increase amid the northern insurgency. West Texas Intermediate traded near a three-day high as fewer Americans filed applications for unemployment benefit.
Futures fell in London and New York. Iraq’s crude exports will accelerate next month, Oil Minister Abdul Kareem al-Luaibi said yesterday, adding to signs that three quarters of the country’s production remains undisturbed in the south. U.S. Jobless claims fell by 2,000 to a one-month low of 312,000 in the week ended June 21, the Labor Department reported today in Washington. The median forecast of economists surveyed by Bloomberg called for 310,000 initial claims.
“The main oil production areas have not been affected yet so it’s normal we see a correction after such a big price increase,” Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, said by e-mail. “But an outbreak of violence of this kind of course endangers production. The potential for less oil from Iraq is still there.”
Brent for August settlement fell 53 cents to $113.47 a barrel on the London-based ICE Futures Europe exchange at 1:59 p.m. London time. It settled at $114 a barrel yesterday, the lowest closing price since June 17. The European benchmark crude traded at a premium of $7.27 to WTI on ICE, from $7.50 yesterday.
WTI for August delivery was at $106.07 a barrel in electronic trading on the New York Mercantile Exchange, down 43 cents. The contract closed yesterday at $106.50, the highest since June 20. The volume of all futures traded was about 28 percent below the 100-day average for the time of day. Prices have increased 8.1 percent this year.
Brent may retreat to $110 a barrel because Iraqi output has been unaffected by the violence, Jens Naervig Pedersen, an analyst at Danske Bank A/S in Copenhagen, said in a report.
“The insurgence has so far not led to any disruption of supplies from Iraq to the global market and, in our view, the likelihood of this happening remains small,” Pedersen said. “Hence, there is a good chance of a further price fall towards the $110 level the oil price was at before the chaos.”
Iraq’s Prime Minister Nouri al-Maliki yesterday rejected calls to relinquish power and allow the formation of a “national salvation” government to counter militants seeking to split the country. The nation is the second-biggest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia.
Violence in Iraq spread yesterday to Kirkuk, the northern region’s oil hub, where a car bomb killed at least seven people and wounded 20, according to a police statement. It was the first attack there since Kurdish forces took control of the area two weeks ago after Iraq’s army fled the advance of the Islamic State in Iraq and the Levant.
Consumer spending in the U.S. grew less than forecast in May as Americans used gains in income to shore up household finances. Purchases, which account for about 70 percent of the economy, climbed 0.2 percent after being little changed in April, Commerce Department figures showed today in Washington.
“There’s a broad theory that the recovery in the U.S. is gaining pace,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “In the face of increasing supplies, prices have held firm and that suggests that the clear driver at the moment is geopolitical tensions.”
U.S. crude stockpiles expanded by 1.74 million barrels last week to 388.1 million, the Energy Information Administration said yesterday. They were projected to shrink by 1.7 million barrels, according to a Bloomberg News survey. Gasoline inventories rose for a fourth week, gaining 710,000 barrels to 215 million, according to the EIA.