WTI and Brent (NYMEX:SCN14) were little changed after capping the biggest weekly gain in 2014. Iraq’s military pummeled the positions of Sunni Muslim insurgents who have captured large chunks of territory north of Baghdad. The fighting hasn’t spread to the south, which the U.S. Energy Information Administration says is home to three-quarters of Iraq’s crude output.
“The uncertainty about what could happen in Iraq is driving a lot of fear into the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “But a lot of geopolitical risk has already been priced in. We need to see the fundamentals tighten to propel oil higher.”
WTI for July delivery rose 3 cents to $106.94 a barrel at 9:04 a.m. on the New York Mercantile Exchange. The contract climbed to $106.91 on June 13, the highest close since Sept. 18. The volume of all futures traded was 46% higher than the 100-day average for the time of day.
Brent for August settlement gained 8 cents to $112.54 a barrel on the London-based ICE Futures Europe exchange. Volume was 22% above the 100-day average. The European benchmark crude traded at a premium of $6.29 to WTI on ICE.
Iraq’s army killed more than 279 fighters from the Islamic State in Iraq and the Levant and destroyed 50 of the group’s vehicles within 24 hours, military spokesman Qassim Ata said in a televised news conference yesterday. Prime Minister Nouri al- Maliki’s Shiite Muslim-led government is seeking to reassert control over territory held by the breakaway al-Qaeda group, whose advances put in doubt his rule over a unified Iraq.
Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, pumped 3.3 million barrels a day of crude in May, according to data compiled by Bloomberg. The country’s three biggest oilfields -- Rumaila, West Qurna-2 and Majnoon -- lie in the south.
“We do not expect material disruption to oil exports,” Adam Longson, an analyst at Morgan Stanley in New York, said in a report today. “Without an outage, market fatigue will likely lower the geopolitical premium in the coming months and allow fundamentals to drive pricing again.”
The country’s 2.58 million barrels a day of exports in May were all shipped from the south while northern shipments via the Kirkuk-Ceyhan pipeline have been halted since March 2, Asim Jihad, an oil ministry spokesman, said June 1.