Brent crude fell as Kurdish and Iraqi forces took control of the country’s largest dam from Islamist militants. West Texas Intermediate fell in New York.
Futures dropped as much as 1.4 percent in London, matching the loss last week. Kurdish forces and government units have taken over the Mosul Dam entirely, an Iraqi military spokesman said on state-sponsored Iraqiya television, while a spokesman for Sunni tribes supporting the militants said that fighting continued on its eastern side. Production in Libya increased to 540,000 barrels a day as the port of Es Sider prepared to ship crude, according to National Oil Corp.
“Prices are sliding again and likely to break into fresh low ground, perhaps today, certainly this week,” Christopher Bellew, senior broker at Jefferies International Ltd., said by e-mail. “The civil war in northern Iraq has stabilized without the Islamic State moving towards Baghdad. Although IS seems to be contained, they are far from defeated, and it looks like we are in this for a long time.”
Brent for October settlement slid as much as $1.43 to $102.10 a barrel on the London-based ICE Futures Europe exchange, and was at $102.30 at 1:38 p.m. local time. The volume of all futures traded was about 30 percent below the 100-day average for the time of day. Prices are down 7.7 percent this year.
WTI for September delivery decreased as much as $1.11, or 1.1 percent, to $96.24 a barrel in electronic trading on the New York Mercantile Exchange. The October contract of the U.S. benchmark crude was at a discount of $7.79 to Brent for the same month on ICE. The spread closed at $8.21 on Aug. 15, the widest since June 24.
Hedge funds and other speculators cut bullish bets on Brent to the lowest level in two years, data from the ICE exchange show. Money managers’ wagers that prices will rise, in futures and options combined, outnumbered wagers that prices will fall by 72,079 contracts in the week ended Aug. 12, the least since July 10, 2012.
Brent climbed 2.7 percent in June, the most in 10 months, as fighters from a breakaway al-Qaeda group known as the Islamic State captured the northern Iraqi city of Mosul and advanced toward Baghdad. The U.S. widened its air strikes over the weekend and used bombers for the first time since the offensive began on Aug. 8 to help secure the dam.
Kurdish forces, known as Peshmerga, and government anti-terrorism units “with joint air support, have taken over the Mosul Dam entirely,” Iraqi military spokesman Qassim Ata said on state-sponsored Iraqiya television. U.S. President Barack Obama for the first time authorized strikes for the purpose of protecting critical infrastructure, not just American personnel or threatened Iraqi minorities.
The conflict in Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, has spared the south, home to about three-quarters of its production. The nation pumped 3 million barrels a day in July, according to data compiled by Bloomberg.
“The situation in Iraq is something that markets will continue to have front of mind,” Ric Spooner, chief strategist at CMC Markets in Sydney, said by phone. “That said, the most likely outcome is Baghdad will hold and there won’t be incursions into the south, or events that will really disrupt oil supply.”
In Libya, output has expanded from 415,000 barrels a day on Aug. 14, Mohamed Elharari, a spokesman for National Oil, said yesterday. Es Sider is one of two export terminals handed over last month by rebels seeking self-rule in the eastern regions.
The average price of a basket of OPEC crudes was $99.94 a barrel on Aug. 15, dropping below $100 for the first time in 14 months, according to data compiled by Bloomberg. There is unlikely to be any immediate supply cut from Saudi Arabia or other OPEC members in response, according to Bloomberg oil strategist Julian Lee. The observations he makes are his own.