Brent nears $113

Brent crude (NYMEX:SCN14) traded near $113 a barrel on signs violence in Iraq may not affect the nation’s oil supply. West Texas Intermediate (NYMEX:CLN14) dropped amid speculation that gains to a nine-month high last week were excessive.

Iraq’s oil exports from its southern terminals on the Persian Gulf are poised to surge, according to a preliminary loading plan obtained by Bloomberg News, at a time when fighting has plunged the north into chaos. The nation’s oil output hasn’t been hurt by the violence, the International Energy Agency said today.

“The situation in Iraq at the moment is not worsening and there is nothing new to generate more upside,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There will be a sharp pullback if it’s virtually assured that the southern oil production is going to be maintained.”

Brent for August settlement rose 7 cents to $113.01 a barrel at 9:15 a.m. New York time on the ICE Futures Europe exchange. Front-month futures ended at $113.41 on June 14, the highest since Sept. 9. The volume of all futures traded was about 45 percent above the 100-day average for the time of day.

WTI for July delivery fell 29 cents, or 0.3 percent, to $106.61 a barrel on the New York Mercantile Exchange. The contract ended last week at $106.91, the highest close since Sept. 18. Brent’s premium to WTI widened to $6.85 a barrel on the ICE from $6.64 yesterday, which was the highest close this month.

Fanned concern

Brent gained 4.4 percent last week, the biggest weekly increase since July, as the unrest in Iraq fanned concern that supplies from OPEC’s second-largest producer may be disrupted. WTI climbed 4.1 percent, the most since December.

“At this moment, not a single barrel of oil has been displaced compared with the situation a week ago,” Maria van der Hoeven, executive director of the Paris-based International Energy Agency, said on a conference call today. “But of course we can see that the market is worrying.”

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. Iraq pumped 3.3 million barrels a day of crude in May, second in the Organization of Petroleum Exporting Countries only to Saudi Arabia, according to data compiled by Bloomberg.

‘Overbought situation’

“What we know now on Iraq has already been taken into the price, so for a further rise there would need to be an escalation that affects supply,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by phone. “We are coming out of an overbought situation so there is a bit of market retracement.”

Exports of Basrah Light crude, Iraq’s main grade, may reach about 2.8 million barrels a day next month, according to the preliminary loading plan obtained by Bloomberg News yesterday. That’s 11 percent more than this year’s average and would be close to a three-decade high of 2.799 million barrels that Iraq said were exported from all its ports each day in February.

The EIA, the Energy Department’s statistical arm, will release its weekly petroleum data tomorrow. Crude inventories probably shrank by 750,000 barrels last week, according to the median projection of eight analysts surveyed by Bloomberg News. Supplies increased to a record 399.4 million in April.

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