West Texas Intermediate (NYMEX:CLN14) rose to an eight-month high and Brent (NYMEX:SCN14) surged as violence escalated across northern and central Iraq, increasing the prospect of a return to civil war in OPEC’s second-biggest oil producer.
WTI advanced as much as 2 percent while Brent gained 2.2 percent. Militants linked to al-Qaeda extended control over Iraq’s second-biggest city and moved south towards Baghdad. U.S. planes may bomb northern Iraq, Oil Minister Abdul Kareem al- Luaibi said today in Vienna. Iraqi crude production rose 50,000 barrels a day to 3.3 million last month, Bloomberg data show.
“This is a major geopolitical event for the oil market,” said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy. “Iraq had been a bright spot ramping up production and now we’re in the midst of a very ugly conflict. Most of the production is in the south but if the rebel advance continues this could be threatened.”
WTI for July delivery climbed $1.62, or 1.6 percent, to $106.02 a barrel at 9:15 a.m. on the New York Mercantile Exchange. Futures touched 106.53, the highest intraday level since Sept. 19. The volume of all futures traded was almost triple the 100-day average. Prices are up 7.7 percent this year.
Brent for July settlement rose $1.90, or 1.7 percent, to $111.85 a barrel on the London-based ICE Futures Europe exchange. The contract reached $112.34, the highest since March 3. Volumes were also almost triple the 100-day average. Brent traded at a $5.83 premium to WTI, up from $5.55 at yesterday’s close.
The European benchmark, which is used to price more than half of the world’s oil, is typically more sensitive to changes to the global supply-and-demand balance.
Militants seized the city of Mosul in northern Iraq yesterday and have halted repairs to the nation’s main pipeline from the Kirkuk oil field to the Mediterranean port of Ceyhan in Turkey. They advanced on Tikrit and there were conflicting reports about whether the 310,000 barrel-a-day Baiji refinery had been captured.
Iraqi crude is being exported from the south and the country shipped 5.43 million barrels of crude from Basrah yesterday, according to the oil minister.
Iraq’s military, backed by air power, attacked fighters of the Islamic State in Iraq and the Levant in Saddam Hussein’s former hometown of Tikrit, about 80 miles (130 kilometers) north of Baghdad, state-sponsored Iraqiya television reported today.