Brent crude, a global benchmark, is set to extend its decline after the U.S. pledged to press ahead with airstrikes against militants in Iraq to protect supplies and help stabilize OPEC’s second-largest producer.
U.S. jets and drone aircraft hit Islamic State fighters in multiple attacks yesterday to prevent the massacre of ethnic and religious minorities in northern Iraq and protect American personnel. President Barack Obama called on Iraqi political leaders to form a more inclusive government to pursue a long-term fight against the militant group formerly known as ISIS, which has seized oil fields near the country’s semi-autonomous Kurdish region.
“Brent should fall because the U.S. has made it clear that it’s going to support the Kurds and the Baghdad government against ISIS and they will not be allowed to continue advancing,” Robin Mills, the head of consulting at Manaar Energy Consulting & Project Management, said by phone from Dubai. “This should mean more protection to oil production.”
Brent for September settlement fell 42 cents, or 0.4 percent, on Aug. 8 to $105.02 a barrel on the London-based ICE Futures Europe exchange. The North Sea grade is a pricing benchmark for more than half of the world’s crude, including Iraq’s Basrah Light and Kirkuk varieties. Brent slid by as much as 77 cents, or 0.7 percent, on Aug. 8, and has fallen 5.2 percent this year.
West Texas Intermediate for September delivery rose 31 cents to $97.65 a barrel on the New York Mercantile Exchange and was down 0.2 percent last week.
Obama authorized air attacks in Iraq as the U.S urged the country’s leaders to form a new government that excludes Prime Minister Nouri al-Maliki. U.S. officials consider Maliki, a Shiite Muslim, a divisive figure whose actions have pushed many minority Sunni Muslims into an alliance with the radical Islamic State.
“The airstrikes are only a small part of that action,” Mills said. “A much more important thing is to get a stable Iraqi government that has a real plan about what to do about ISIS and can actually bring the factions together and try to fight back.”
Iraq, with the world’s fifth-biggest crude reserves, is the largest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia. The nation pumped 3 million barrels a day in July, data compiled by Bloomberg show.