Brent Heads for Second Weekly Gain in IraqBen Sharples and Grant Smith
Brent crude headed for a second weekly gain as the U.S. said it will send military advisers to Iraq amid escalating violence in the OPEC producer. West Texas Intermediate was steady in New York.
Futures were little changed in London after rising the past three days. President Barack Obama said he’s dispatching as many as 300 military advisers to help the Iraqi army battle an insurgency, and the U.S. is prepared to take additional “targeted” action if necessary. WTI is trading near a technical level where last week’s price advance stalled, data compiled by Bloomberg show.
“Tensions have grown within the last couple of days,” Hannes Loacker, an analyst at Raiffeisen Bank International AG in Vienna, said today by e-mail. “If there’s a realistic threat that the production in the south will be affected, then oil prices will rise much higher. But, as of today, it seems not to be at risk.”
Brent for August settlement was at $114.91 a barrel on the London-based ICE Futures Europe exchange, down 15 cents, at 1:08 p.m. London time. The contract climbed 80 cents to $115.06 yesterday, the highest close since Sept. 6. The volume of all futures traded was 14 percent below the 100-day average. Prices increased 1.3 percent this week.
WTI for July delivery, which expires today, was 5 cents lower at $106.38 a barrel in electronic trading on the New York Mercantile Exchange. The more-active August contract was down 12 cents at $105.93. The U.S. benchmark crude was at a discount of $8.99 to Brent, compared with $6.45 on June 13.
Brent rallied 4.4 percent last week, the most since July, as the advance of Sunni fighters from a breakaway al-Qaeda group raised the specter of sectarian civil war in Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries. The turmoil also threatens to draw in regional powers including Shiite-ruled Iran and Sunni Gulf Arab states.
The Pentagon has given Obama a plan to send special operations forces to Baghdad to help the military gather and analyze intelligence, according to a U.S. defense official.
“American forces will not be returning to combat in Iraq,” Obama said yesterday after meeting with his national security team at the White House.
The fighting so far hasn’t spread to Iraq’s south, home to more than 85 percent of its 3.1 million barrels a day of production in April and all of its 2.5 million barrels of daily exports, which are shipped by tanker from the Persian Gulf, according to Oil Ministry data. Some supplies can also be sent north to Turkey through pipelines from the autonomous Kurdish region and west to Jordan by truck.
“The oil market has been shaken out of its torpor following recent events in Iraq,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said in a report. “Once again, geopolitics in the Middle East introduces uncertainty in what was hitherto a range-bound and low-volatility oil market.”
WTI may climb next week because the Iraqi conflict, a Bloomberg News survey shows. Sixteen of 32 analysts and traders, or 50 percent, forecast futures will rise through June 27 while nine estimated a decline.
The front-month WTI contract is trading near the upper Bollinger Band, which prices failed to surpass at the close of trading last week, according to data compiled by Bloomberg. This indicator is at about $107.40 a barrel today. Sell orders tend to be clustered around chart-resistance levels.